INDU Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, May 11, 2000

• 0931

[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 today, from the Canadian Council for International Business, Mr. Robert Keyes, president and chief executive officer; and Mr. Milos Barutciski, member, competition policy and law committee, and partner, Davies, Ward and Beck.

We're very pleased to welcome you both. I'll turn it over to you for your opening comments.

Mr. Robert Keyes (President and Chief Executive Officer, Canadian Council for International Business): Thank you, Madam Chair. Thank you to the committee for providing us the opportunity to make some input from the business community on the important realm of competition policy in your current review of the act.

The CCIB, the Canadian Council for International Business, is the Canadian business secretariat for two important international organizations—the International Chamber of Commerce, and the Business Industry Advisory Committee of the OECD—and in this capacity we're the key business voice on policy issues being discussed at a number of multilateral institutions—the UN, the OECD, and the WTO. We also have a committee that is very active on competition policy, so we think we're well placed to make comments on the act.

We've been engaged in this issue since the early 1990s, and we continue to monitor and comment on discussions taking place at the OECD, the WTO, and the International Competition Policy Advisory Committee.

As a bit of background, I would like to point out that the increasingly international nature of business transactions has resulted in a growing number of mergers and cooperation projects falling within the jurisdiction of more than one competition authority. This is the nature of the increasingly globalized world and it is a reality.

In response to these trends, competition authorities are examining means of cooperation to facilitate and coordinate the respective reviews, investigations, and decision-making processes.

While we recognize the potential benefits of this kind of cooperation across authorities, the business community has also been greatly concerned by one of its main elements: the exchange of confidential corporate information between competition authorities. Mr. Barutciski will be talking about this in some detail.

This kind of information, which is supplied to authorities in the context of merger reviews or antitrust investigations, often contains extremely sensitive information relating to strategies of companies, their investment plans, and their marketing goals and methods. So it's very important that this information be safeguarded.

Mr. Barutciski is a partner with the law firm of Davies, Ward and Beck and is one of our valued members who participates in our competition policy and law committee. He also chairs the international affairs committee of the Canadian Chamber of Commerce, an organization with which we work closely. He has extensive background in the field, and I think will be a good person to comment on the Competition Act.

• 0935

I'll now turn the floor over to Milos. We just note that we will submit some written comments later on some of the key points. We've not been able to get them together, given the short notice we had, but we will be providing you with written material later.

I'll now turn to Milos.

The Chair: Okay.

Mr. Milos Barutciski (Member, Competition Policy and Law Committee, Canadian Council for International Business): By way of background, as Bob pointed out, I've been involved not just with the CCIB, but also the Canadian Chamber. I chair the chamber's international affairs committee.

My background for the past 15 years is not just as a competition lawyer, but also as an international trade lawyer. Basically, the totality of my practice is international business transactions.

Now, why am I here to talk about this issue? Just to frame the comments we're going to make today, we're really focusing only on Bill C-471, the mutual legal assistance bill that Ms. Jennings put forward.

I'll say at the outset that we support the bill. We think it's a very well-crafted piece of legislation. It's obviously a pretty sophisticated piece of work, not just something that was thrown into the wind as a flyer.

That said, we're here with a view to making some comments that we think will improve the legislation and hopefully make it more effective in attaining its objectives. I hope the committee takes these comments in that spirit.

Why me, as opposed to any number of other members of our competition law and policy committee, or the chair of the committee? My background in this area extends pretty much to the beginning of international antitrust enforcement cooperation, which really goes back just to 1991.

I was previously in private practice here in Ottawa, and then joined the Competition Bureau as a senior adviser on international matters, first to the former commissioner, the director of investigational research back then, Howard Wetston, from 1991 to 1993, at a time when we were doing the very first preliminary work in using mutual legal assistance, the MLAT treaty on criminal matters. That was the original fax paper case, which was the first big success story, not just in Canada, but anywhere in the world, on cross-border antitrust cooperation.

So my involvement with this issue literally goes back right to the beginning a decade ago as an enforcement official. I subsequently went back to private practice, but was retained once again by the next director under a different government, George Addy. I spent a year again in Ottawa, once again full-time on retainer as a special adviser to George Addy, the deputy commissioner, specifically on international enforcement issues.

So through that time, as I say, I've been involved in this area. It's been close and dear to my heart, not just as a private practitioner, but as an enforcement official on specific cases, and also on a policy level. So as I say, this is a matter that's close and dear to my heart.

I, and I think the CCIB, as Bob points out, recognize that there's a need for an improved and enhanced legislative framework for international enforcement cooperation. Just to make sure that everybody understands this is a consistent position going right back to 1995, when George Addy, the then commissioner, launched the consultation process on proposed amendments—part of which was this issue, but it was then pulled back as a result of the Schreiber case and some other problems we ran into—the CCIB made their submission to the bureau, saying that it accepted that current and future trends to greater internationalization of business activities required that competition law authorities be empowered to exchange information in order to effectively enforce their domestic competition laws.

So the CCIB has been pretty consistent in supporting the objective of this piece of legislation, this bill, and we're not changing that position.

At the same time, going back to 1995 and before, as Bob pointed out, the CCIB has always been concerned that the initiative or the effort to enhance enforcement cooperation be done in a way that adequately and properly safeguards competitively sensitive commercial information that Canadian companies depend on and have developed that reflects their business plans, strategies, investment plans, product development plans, marketing plans, R and D, and retrenchment strategies in bad times. All of these issues, if they get out, can be fatal to any company.

• 0940

Ultimately we're talking about Canadian businesses, and therefore the impact will be not just on businesses but on their employees, shareholders, and the communities where those businesses operate.

The stakes are high, Madam Chair and members. We believe cooperation is necessary, but the framework and the fine-tuning of it are absolutely critical.

Why do we need the business protection? One reason is the point I just made about the potential risk of adverse impact on Canadian businesses and the Canadian economy. The other one, though, is a broader reason, and it's one that really reflects the public interest.

If you implement a system that is too loose and information is at risk or is perceived as being able to get out to competitors... Some of those competitors, let's not forget, may be governments, competition authorities, foreign competition authorities, in countries that have large state trading enterprises. If you're talking about the European Union, there are a lot of companies in the European Union that are owned by their governments. There are many governments, not just in the EU but elsewhere, that take some pretty strong national champion positions on the implementation of their competition laws. So you're giving it potentially to a government that is also a shareholder or the 100% owner of a competitor of the company. There are some pretty inherent risks.

Why is that a broader public interest? The broader public interest in Canada is... An effective competition enforcement system depends not just on having the kinds of tools that the act provides: search and seizure, subpoenas, and the like. Once the investigative process is engaged, effective enforcement depends on being able, as often as possible and preferably in all if not the majority of cases, to bring these matters to resolution short of going to extensive litigation that is expensive to both government and the private sector.

I've just come out of a very lengthy piece of litigation on the Superior Propane case, and believe me, it was expensive, as much for the other side as it was for my client. It was costly and there were a whole bunch of issues. The matter is done and we're waiting for a decision.

That is not the ideal model. I think the commissioner, Konrad von Finckenstein, made that point when he was here. We need a more efficient and a more expeditious means of resolving disputes.

The way to do that is the way most disputes are resolved in competition law in Canada, which is through informed negotiation and ultimately resolution between the bureau and the companies concerned. The key word I want to underline is “informed”. In order for those discussions to be fruitful and productive, the companies need to have confidence that they can tell the bureau all the facts that are pertinent and that information isn't going to slip out, to their detriment, in perfectly legitimate context.

I'm not talking about information relating to a secret cartel. In those cases, the hard-core price-fixing cases, the only time there is that kind of disclosure is when a party is in there pleading for immunity or some kind of plea bargain. In the cartels, the really ugly competition cases, either the bureau gets it by executing a search warrant or getting a subpoena or the company comes in and says “We really want to settle. We want to settle on better terms than we would have otherwise, so we're going to give you all the information we can, hopefully to advance your case.” We all know how plea bargaining works. If we help you get the next guy, hopefully you'll take the crosshairs off us and ship them over to the bear next door.

That's a different context. This is very different from what we're talking about here. I believe that's recognized by the bill in the introductory comments, which I seem to recall make a reference specifically to making mutual legal systems available in civil matters, non-criminal matters, as well as by the commissioner's discussion paper that he issued last month on this bill and the other private members' bills that are before the House.

Those are the framework or the background pieces I want to lay out before I move to some very specific comments. Again, I'm not making comments as to particular drafting: take this comma out or add this word there. There will be plenty of time as this goes to the consultation process. Eventually there will be a parliamentary committee, a legislative committee, so there will be ample time to get into the kind of legal comma-plucking that I can do as well as anybody else. The members of this committee, I'm sure, have more experience at comma-plucking in legislation than anybody at this side of the table. There will be time for that.

• 0945

The comments I'm going to make now are really at some of the guiding principles and the elements of the legislation.

As I said, we commend Ms. Jennings for bringing this bill forward. It's obviously a very sophisticated bill. I've been involved in this area for over ten years now, and as I read it, it has clearly been influenced by a long history of legislation and proposed legislation in this area. It draws from the U.S. International Antitrust Enforcement Assistance Act. It draws from various proposals that have been put forward in Canada and elsewhere. It's a very finely crafted piece of legislation.

Some of the things that we think might make it a tighter, more focused, and more effective document revolve around these issues.

First, we already have a mechanism for cooperation in criminal matters. There is the Mutual Legal Assistance in Criminal Matters Act and the treaties negotiated and implemented by that act that deal with criminal antitrust enforcement. So we think the bill should be more focused on the civil matters specifically, because I don't believe it is in its current drafting. That may be an oversight, because the preparatory comments, the summary of the bill, suggest that's what it's aimed at.

The reason we think that is related to the point I made before: that there are different considerations at stake in criminal matters, as opposed to civil, administrative, or competition law matters. The criminal matters tend to be looking at what you did last year, or in a lot of the big cartel cases it could be 10 or 15 years ago. Information of that sort often is not particular competitively sensitive. Sometimes it is, but not always. It's historical—whereas in the civil matters, abuse of dominance, mergers especially, you're looking forward, and the information the bureau needs to investigate and assess these cases properly is current, up-to-date information of the companies: their current business plans, capacities, R and D programs, and product development.

That stuff is far more sensitive than your market share and production figures from 1983, which you may not want to let out if they in fact help somebody prove that you've committed a criminal offence, but I don't think that's the kind of sensitive commercial or confidential interest this committee needs to be concerned about. In those cases, companies go out and hire people like me. But you're concerned with the public interest, and that's why I say, in the civil context, going forward, that information is information you should be as concerned about as the businesses to which it pertains are.

The other point here—and I don't know that it can be reflected in this bill, but there may be a way it can—is the issue of convergence. The commissioner and others have made the point that competition law is converging internationally. That is true. But at the same time, as anybody who has been following this field closely, as this committee has, or the trade subcommittee of the foreign affairs standing committee knows, convergence hasn't really gone far enough to let the matter really unblock at the international level. The fact that competition policy was such a controversial thing and was one of the controversial issues that pretty much quickly fell off the table in Seattle last December—and I was there on behalf of the chamber and CCIB—is an indication that convergence hasn't gone all the way.

So you may want to reflect on having some language in here to make sure that if we're cooperating with somebody, it's with a country that has a competition law that approximates or at least reflects what we call competition law, not something that's completely different—national champion industrial policy in the guise of competition law. Out of the 80-plus competition acts in the world, I can point you to several that are really more industrial policy and picking national champions and giving them a break at the expense of foreign competitors, as opposed to real competition acts that protect the competitive process.

I'm going to take about two minutes to go through a list of suggestions. This is going to be very brief.

The key issue for us with respect to the prospective legislation is the notion of notice. We believe notice to the companies who provided the information is of fundamental importance. Again, in civil matters, we're not talking about cracking a covert cartel; we're talking about dealing with a merger that has been announced and notified to the authorities, or alleged abuse of dominance where the supposed victims have made complaints and say they feel they are being abused by these companies. It's out in the open; people know about it. So the idea that if you let the bag out by telling the companies we're sharing it with the Americans or with the Europeans you're going to prejudice the investigation really doesn't hold any water.

• 0950

That may be true in a cartel case where the cartel is still in existence, perhaps, or even an old cartel where if you let it out you're afraid they'll go straight to the shredders and destroy the evidence, but not in this context. This is existing practices we're talking about, or going forward, in the case of mergers.

So it's notice to the parties concerned before the information is given, to give them an opportunity to point out to the government why this is particularly sensitive and they should ask for specific safeguards or deal with it in a certain way, or not give it out, as the case may be.

Second, I said I wouldn't get into detailed commentary on the bill, but I will draw your attention to paragraph 30.4(b). This is the list of essential elements of any cooperation agreement. It says the agreement must contain provisions respecting “the confidentiality of information sent by Canada to the foreign state pursuant to a request”.

Our only suggestion there is that all that says is there need to be measures respecting confidentiality. It doesn't say what the standard of protection or those measures might be. So, prima facie, the act doesn't constrain the ability of the commissioner or the minister to enter into an agreement that basically gives it up completely or has only the slightest confidentiality protection. We would suggest and urge Ms. Jennings and the government, if it takes up the bill, to specify with greater precision what the protection should be.

I would point you to the U.S. example, where the standard is confidentiality protection in the foreign government we're sending the information to that's at least as strong as what we have in Canada. That's a fairly... I won't say a simple standard, because what the protections are varies so much government to government, but it's one the U.S. has chosen to invoke, and we shouldn't be short of that, particularly since a lot, if not most, of our cooperation will be with the U.S.

Third, as I mentioned before, the act doesn't really distinguish very clearly that it's focused on civil and non-criminal matters, and I think that should be incorporated.

Fourth, on the administration of the process, the legislation—I think it's in proposed section 30.6—says the commissioner would be responsible for implementation. In principle, that makes sense, because if he has the information and he will be going out to get orders if they're required, or search warrants if they're required and he doesn't have them, since the bill specifically says Canada retains a right for reasons of security, sovereignty, or public interest to refuse to give it up, I would suggest to you that the commissioner, with his very narrow and focused mandate, is really not in a position to speak for the Government of Canada on matters of security, sovereignty, or the broader public interest.

So I would suggest that you incorporate into the piece, much as is incorporated in the mutual legal assistance treaties on the criminal side, a role for the Minister of Justice and/or the Minister of Foreign Affairs and International Trade, who actually speak for Canada on broader law enforcement and international relations, sovereignty and security issues.

That is a little too much like leaving it to the cop to do it himself. Even in the securities commission context, where there's a lot of back and forth and there are MOUs between the three main securities commissions in Canada and U.S. SEC, the requests generally go from the enforcement staff to the commission. The commission actually sits independently, in some ways, of its own enforcement. They sit in a quasi-judicial role here.

Fifth and penultimate is the issue of voluntary information. The point I made to you earlier about an effective dispute settlement process depends on the majority of the cases being settled in a non-litigious fashion. That means companies have to feel confident when the bureau is investigating them that they can go to the bureau and say “Look, you're really barking up the wrong tree for these reasons, and we can prove it to you, but we're a little reluctant to show you the facts if we're uncertain about where you're going to send it afterwards”.

With information the bureau gets voluntarily from companies, we feel it should be beyond the pale of exchange under this kind of arrangement. The bureau is completely free later to obtain an order from a judge using the usual section 11, a subpoena process or a search warrant to get that, but then it has to invoke a process that it would do even domestically.

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Finally, on mergers generally, we believe that merger filings under part IX of the act and advanced ruling certificates and the information submitted in that context should be excluded from this process prima facie, at least in the sense that the bureau shouldn't be able to give that out once it has it. It's a little bit like what I said before. This is forward-looking. Even the U.S. has excluded mergers in HSR—Hart-Scott-Rodino Act filings are the equivalent of notification in their legislation. Why? Because of the particularly sensitive and forward-looking nature of that information.

It doesn't preclude the bureau from saying to take that out of the scheme that allows them to give up what they have to the foreigners. I don't mean foreigners in a pejorative sense, but the people we're cooperating with on an investigation. When it's that kind of information that the bureau has obtained for a very narrow purpose, merger enforcement, then the bureau knows it's there, and there's no problem with the bureau going to a judge, as it would have to in order to get an order under section 11 or a search warrant under section 8, and saying “Mr. Justice, we have reason to believe that an offence may be committed in the foreign jurisdiction. We have reason to believe there may be evidence of that offence in such and such a location and in such and such a company. Please authorize us to obtain that information or require the company to deliver it.”

Those are the specific comments. I hope they can be of some assistance. As Bob Keyes said, we'll try to put something together that is not necessarily more detailed or lengthier, because the process will go on, but we'll try to summarize that in a more useful piece for you.

Thank you, Madam Chair, members.

The Chair: Thank you very much.

We're now going to turn to questions. Mr. Penson, please.

Mr. Charlie Penson (Peace River, Canadian Alliance): Thank you, and I'd like to welcome both witnesses to the committee this morning.

Mr. Barutciski, I'm not going to deal with your specific recommendations. I know that our researchers here have made note of them. But I want to take advantage of your being here and your experience in international competition policy to talk a little bit about that aspect of it. I'll leave others to address the specific issues.

When it comes to international competition law, which we hope to move to someday—I know there's a working group on that area at the World Trade Organization—I can certainly appreciate what you're saying with regard to confidentiality when it comes to other governments having state trading enterprises. I know there are many that use competition policy as a barrier to entry, in fact.

I'm wondering about the evolution of this. I know you said that in Seattle it kind of fell off the table, but I assume that at some point it's going to move forward, and probably it would be a good thing for all of us. My concern is that we don't end up with international competition policy that's sort of the lowest common denominator just because you want an agreement, and that becomes a low level of competition policy. Can you give us your view on how that might evolve?

Mr. Milos Barutciski: Certainly. Thank you, Mr. Penson.

On your first point, about competition policy being used as a barrier, I think you're quite right. I think the trend is away from that. There are certain countries that historically have been prone to a national champion policy in the implementation of the competition law. I don't want to cast aspersions by naming specific countries, but I'm sure your researchers and you yourself probably know some of the countries I'm talking about. I think we are moving away from that.

To go to your second point, on Seattle—

Mr. Charlie Penson: I'm sorry to interrupt you. Are we one of those?

Mr. Milos Barutciski: We have been in the past—and I mean quite a while ago—a little bit that way, but less in the drafting of our legislation, the old Combines Investigation Act, which on its face was pretty neutral in terms of supporting the process of competition, rather than picking winners and losers. But in its application—and I'm talking really decades ago—the enforcement may have been to some extent influenced by that.

This connects directly to your second question, on the international stuff, and it might be of interest to the other members as well. To give you an example, back in the 1970s the uranium cartel case was litigated civilly in the United States by Westinghouse. That case was a perfect example of where trade and competition came together in a very perverse way. That case was won, where the U.S.—I can't remember if it was in the late 1960s or early 1970s—in order to protect its own uranium producers, introduced an import ban, an outright prohibition, a trade barrier of 100% on foreign uranium.

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Westinghouse, a U.S. producer who had made a number of commitments to customers to supply at a certain price, was caught by this. As you can imagine, when you introduce that kind of a ban prices go up. You restrict supply, and prices will go up, at least in the country where the supply is restricted.

You can imagine what the motivation may have been: Let's put a ban to protect domestic uranium producers. But what that means is one of the biggest uranium markets, the United States, is foreclosed to the foreigners. So the foreigners—namely Canada, Australia, the U.K., and some other countries—all of a sudden see a big part of their market dry up.

Allegedly the uranium producers, including some Canadian companies and including what were then crown corporations, were accused of responding to this drop through the floor of their prices by fixing them and getting them back up where they would have been. That's illegal, perhaps, but it was provoked by an entirely discriminatory trade policy on the U.S. side, the biggest purchaser.

So that case led to some very perverse incentives, and the Canadian government was torn. While the bureau was investigating this alleged cartel, the justice department was fighting the U.S. request for information and discovery from Canadian companies on the basis that this encroaches on our sovereignty and impacts on crown corporations. The matter went up to the Supreme Court.

Historically, going back decades, we may have been tainted a little bit by that, but I think on the whole Canada has a pretty good record.

Mr. Charlie Penson: Can I just follow that up?

As we move to more international competition policy, you have suggested that countries that use competition law as a barrier are becoming less in number and not using it as much. But doesn't really mean that we probably, like all countries that are negotiating and hoping to sign an agreement, will have to be conscious of our regulated industries, even at home? Just the very fact that they're regulated in many cases means there is no competition policy that guides them.

Mr. Milos Barutciski: Either no competition policy or attenuated application of that policy—it could be trumped by regulatory measures or regulatory directives. I think you're right.

To link that back to your question about Seattle, I think that while it fell off the table in Seattle—and nobody's ranking competition policy as one of the leading contenders for getting back on the table when a round comes up, or being at the front end of the pack in terms of lists of priorities—I'm confident, and I think most practitioners, in both the trade and competition side, are confident that we will end up there. Whether it's in the next round of negotiations or shortly thereafter, we will be talking about this.

To link up to your point about regulated industries, that is explicitly recognized in the WTO's working program—that government regulation can have as detrimental an impact on competition as private restrictive practices. So that's something the governments at the WTO and the Canadian government and the commissioner are very well aware of. It's part of the work plan.

On the broader point of the lowest common denominator, I couldn't agree with you more. The best example I can give you of the risk of rushing to negotiation at the WTO is that in the hope of reaching an agreement we end up with one at this level that doesn't reflect the standard of enforcement or the standard of law that we have in our country and many of the other developed countries. The object case for that is article VI of the GATT. This is the article on anti-dumping. I know that has been a concern of yours, Mr. Penson, in the past. Canada, through the FTA negotiations in the 1980s, tried to get out from under the threat of U.S. anti-dumping action because it makes no sense in a free trade area.

Article 6 of the GATT entrenched a model of anti-dumping in 1947 that we've been burdened with like a millstone around our necks for fifty plus years now. Today, if you try to change a comma in article VI or the GATT codes or now the WTO code on anti-dumping, there are a lot of stakeholders. It used to be just in the U.S. Congress and a few U.S. industries. Now it's in Europe, and we're seeing even in Canada there are some industries that are saying “Don't touch the anti-dumping laws”. So a perfect object case why an early rush to negotiations just to get an agreement, any agreement, even a low-standard one, may be a recipe for disaster is what happened in the anti-dumping clause.

Mr. Charlie Penson: Can I just finish off by getting your assessment of where we're heading in terms of cooperation and understanding by moving to international competition law, even if it means having to take some of our sectors worldwide? Every country has regulated sectors and state trading enterprises, but that is a poor model to use rather than to have it unregulated but use a competition policy.

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What's your assessment? Are we making progress, or is it stalled? What do you expect to see happen in international competition law in the next ten years in those particular areas?

Mr. Milos Barutciski: I think we'll see some progress. The reason I hesitate to be more specific than that, when I say I think we'll see some progress, is there's a recognition that regulation impacts on competition and that the greater the regulatory intervention the greater that impact. And by impact I mean detrimental impact, reducing competition and reducing the benefits that flow from competition.

That said, you really have to look at it sector by sector, because regulation doesn't exist in a vacuum. Regulation is there for a reason, and it varies from sector to sector. There may be sectors where it's there for historical reasons and should be removed. And I think the recognition is there among governments, including probably every party in this country today at least, that we have some places where we're over-regulated. But there are sectors and there are subjects where regulation is probably warranted. For example, we may have regulation for pure health and safety reasons and where we're prepared to trade off some of the competitive efficiency gains in favour of ensuring a higher level of protection of health and welfare.

You have regulation for labour standards. You have regulation for human rights. So it's difficult to sit there and say in the abstract, without getting into sector by sector and regulatory model by regulatory model, how the trend in the competition debate toward mitigating some of the detrimental impacts of regulation will go, because it depends. When it comes down to the use of highly toxic chemicals in the mining industry, I suspect a lot of interests, sectoral, political, and ideological, would like to see certain highly toxic substances restricted.

On the other hand, when it comes to some leftover baggage... For instance, we happen to have regulated certain products in the weights and measures area, or transportation. We have a whole bunch of regulation on transportation. I'm not even talking about the foreign ownership stuff, which is a separate piece your committee has looked at. But apart from the foreign ownership, there's a whole bunch of regulatory baggage in transportation that we could probably dispense with and turn over to the competition policy model.

You really have to look at it sector by sector and regulatory model by regulatory model.

Mr. Charlie Penson: I'd like to talk to you further about that in regard to the sectors, but we don't have time today.

The Chair: Thank you, Mr. Penson.

Madam Jennings, please.

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you, Madam Chair.

Thank you very much for your presentation and for your comments about Bill C-471. As you probably understand from your extensive review of it, I had quite a bit of assistance from some very able lawyers who have expertise in the area in drafting that piece of legislation.

I want to address one issue with you. When the competition commissioner has information in the civil area, and if this legislation goes through, this mutual cooperation in civil matters, and there is a request from a foreign jurisdiction to have access to that information, if the information the commissioner receives or has in his possession or her possession—it might be a female commissioner... If the information was obtained, for instance, in the framework of an investigation into a merger, because it was such a narrow focus, the commissioner should not of his own authority be able to simply divulge that information to the foreign entity, even if we already have the other assurances that you stipulated and recommend; that is, that their competition act be similar, their competition laws be similar to those we have here in Canada, that their standard for maintaining and protecting the confidentiality of information be the same standard we have here. Even with all of those safeguards and guarantees, the commissioner should have to go and get a judicial order that would allow him or her to divulge that information.

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Do you not think that if your recommendation about prior notice to parties was effected in that piece of legislation, it would cover it? Because we're presuming that if the commissioner has the information, it means the commissioner obtained it in the form of some form of investigation into some matter, whether it was a criminal matter or a civil matter.

Then two years down the line, or one year down the line, in a completely different situation, you have the United States, for instance, requesting that information under a mutual assistance agreement in civil matters. If there was the prior notice that you recommend should exist, that would then allow the party that information originates from, the company, if they think it would in fact put them in a precarious situation because of some R and D information that could be advantageous to a competitor, or whatever, to go before the commissioner and say “Wait a minute. This information should not be shared for X, Y, and Z reasons.” Then if there was disagreement they would go before the tribunal, for instance, or before a court in order to get that tranché, as we say in French.

Mr. Milos Barutciski: Thank you, Ms. Jennings. I agree with you. Maybe I wasn't clear, and on the short notice I had to appear, I didn't actually prepare detailed remarks. It was just bullets.

Ms. Marlene Jennings: That's okay. I wasn't prepared to have my bill discussed today. I thought we were discussing one of the other private members' bills. I don't even have a copy of my bill with me.

Mr. Milos Barutciski: You're more than welcome to borrow one of mine. Bob and I will share.

I do agree with you, and that is why I put notice right at the front end. I think notice ensures that the parties... Let's remember what we're talking about. This is information that is already in the hands of the bureau.

Ms. Marlene Jennings: The commissioner.

Mr. Milos Barutciski: The commissioner. And there's a foreign request to him to provide that notice to a foreign agency to help them in their investigation. If he doesn't give notice, then or my client, to use a hypothesis, can do absolutely nothing to point out to the commissioner some of the sensitivities that he may want to think about and some of the conditions he may want to impose on that foreign agency as a quid pro quo for getting it.

Ms. Marlene Jennings: Sure.

Mr. Milos Barutciski: So the notice really is essential to allow the commissioner to make an informed decision whether or not to comply with the request. And in that context, I believe you're right. I don't think there you necessarily need to have the commissioner give notice and then of necessity go before a judicial body for an approval. But in case there is a dispute once the commissioner gives the notice, somehow you need to integrate into here—

Ms. Marlene Jennings: A mechanism.

Mr. Milos Barutciski: Exactly, that there is a mechanism that in case of dispute my client would have a third party who's independent, who's not just, pardon me, an enforcer.

The Competition Bureau, God bless it, has many very competent officials and tries to do a good job, but they are an enforcement agency and have a very narrow focus. So you need to make it clear that the companies would have some avenue, a third party, judicial—whether it's a tribunal or court I'm somewhat agnostic about. But yes, I think you need to spell that out in here. Because otherwise what's going to happen is my client is going to say to me, “They've given us notice. What are we going to do?” And I'm going to have to say to them, “We have a couple of options. The act specifies nothing. So let's rush to the Federal Court or maybe the provincial superior court and see if we can get some kind of ad hoc application, injunction on I'm not quite sure what rules, but I'll find some.” And then we're going to litigate that forever until the Supreme Court decides it, and then the matter will be back before this committee, or you, Madam Jennings, to try to amend it.

Ms. Marlene Jennings: If I'm still on the committee.

I just wanted that clarified, because it really wasn't clear when you were talking about the issue of information that's been provided voluntarily to the commissioner, say, in the issue of some kind of dispute mechanism where both parties, etc... or whether it was information that the government, the bureau, received in its investigation of a merger.

Mr. Milos Barutciski: Let me qualify what I just said, because there are a couple of little categories. We were talking about information that's handed to the bureau. What I also said was the bureau gets information through various mechanisms. Much of it is through enforcement mechanisms, like subpoenas under section 11, orders and searches. It also gets it under filings under part IX in merger cases. It also gets it through applications for advance ruling certificates under section 102 and so on.

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It also gets it informally, in the course of settlement discussions. I'm suggesting in the latter category it legitimately has the stuff it gets through a formal process under conditions the act specifies, and this would just further specify that one of those conditions or terms is that it is eligible for being transmitted abroad.

I suggest you carve a few things out of there from the straight notice and give them out, because merger information altogether—part IX filings in section 102—is so highly sensitive. It is really the crown jewels. In all this piece about discussions, the merger information is the most highly sensitive. Even the Americans have chosen not to put that in their cooperation legislation. The recent ICPAC—the International Competition Policy Advisory Committee that the Attorney General of the U.S., Janet Reno, formed—recommendation was to not put merger HSR stuff back in. So there is a rough international consensus that it is really special.

Second is voluntarily supplied information. Once again, I would suggest that should not be just, even with notice, “off you go”, for the simple reason it would risk creating a chilling effect on the willingness of companies to give the bureau information it wouldn't otherwise get, and might not be able to get an order to obtain.

As I've mentioned, the way you ensure effective dispute settlement is precisely by creating incentives for parties to divulge and disclose to the bureau, if the parties disagree with where the bureau is heading, to put them back on the right track.

Ms. Marlene Jennings: Let me make sure I understand you. If I agree with what you're saying, I'll be going back to draft amendments to my private member's bill.

First, in the case of mergers, it should simply be carved out completely, and the bill should expressly carve it out.

Second, in the case of information that has been given voluntarily—not through any use of the commissioner's authority—for whatever reason by a company or several companies or whatever, that should also be carved out, and the bill should stipulate that expressly. That means if the commissioner has information he or she has received voluntarily in an informal fashion—not through any application of the commissioner through his authority—then the commissioner in that case has to go before some body, whether it's the Quebec Superior Court, the Federal Court, the Competition Tribunal, or whatever, in order to have the authority under search and seizure to get that information.

Mr. Milos Barutciski: That's right. Precisely.

Ms. Marlene Jennings: Any other information the commissioner has received under his authority can be shared with a prior notice.

Mr. Milos Barutciski: With a prior notice and some mechanism to allow the party to—

Ms. Marlene Jennings: Sure.

Mr. Milos Barutciski: Let me just specify further the reason why I'm saying judicial review, even though there is prior judicial authorization. The requirement for judicial review or judicial authorization warrants and subpoenas is a fairly straightforward one, from a due process standpoint. It acts as a check on frivolous, overreaching, or fishing-expedition types of inquiries and requests because it really requires the commissioner, or any enforcement or police, to go before an independent third party, ex parte. The party will get the notice when they're served with the subpoena and we'll have an opportunity to run to the courts then if we disagree. But at least it acts as a check on that initial impulse to go out and get everything.

You still have to satisfy a judge that there is some rational nexus between what you're asking for and what you're after in your investigation. There's a lot of case law and jurisprudence in the Supreme Court and the jurisprudential literature on why third party or judicial authorization is required for search warrants and those kinds of things.

Ms. Marlene Jennings: Thank you.

The Chair: Is that it?

Ms. Marlene Jennings: For now.

The Chair: Thank you, Madam Jennings.

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[Translation]

Mr. Dubé, please.

Mr. Antoine Dubé (Lévis-et-Chutes-de-la-Chaudière, BQ): Before asking the witness a question, I would like to note that I have just been made aware of the Bill put forward by Mrs. Jennings, Bill C-471, an Act to amend the Competition Act, which we are reviewing more broadly. Are you aware, Madam Chair, of any other Private Members' Bills dealing with the Competition Act that may have been introduced?

[English]

The Chair: Mr. Dubé, there are four private members' bills that have been submitted to the House in respect of amendments to the Competition Act. The Minister of Industry has instructed the Public Policy Forum to do an investigation, review, or consultation based on those four bills. We are reviewing the Competition Act in more general terms, but if witnesses have comments on those bills, we're looking for them as well.

You received all four bills a while back in your office. We had the Public Policy Forum here last week, I think, to discuss the process they would be carrying out.

[Translation]

Mr. Antoine Dubé: Okay. Thank you very much. I am not very familiar with the Canadian Council for International Business, but as I read the Competition Act once again, I see that its purpose is to promote the efficiency and the adaptability of the Canadian economy. There are three specific objectives: to expand opportunities for Canadian participation in world markets; to ensure that small- and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy; and to provide consumers with competitive prices and product choices. Which of those three objectives do you consider a priority?

Mr. Milos Barutciski: In fact, Mr. Dubé, I do not consider any of those aspects to have a higher or lower priority simply because there is no priority assigned in the Act. In fact, the Act attempts to balance several objectives. I would say that ultimately, those objectives, even though they may sometimes appear to be conflicting, are in fact fairly consistent as the purpose of productivity and efficiency is to give consumers a choice of products and competitive prices. Therefore, both objectives are consistent.

As to the opportunity for small- and medium-sized enterprises to participate, the context is exactly the same. When there is not barrier to entry, when you have a competitive market with no monopoly or abuse of a dominant position, small- and medium-sized enterprises have the opportunity to develop a new product or a new process to manufacture an existing product. So, it is a competitive framework which helps promote the interests of small- and medium- sized businesses. I believe there was a fourth purpose in the Act. You did not mention it, but I thought there was a fourth one.

Mr. Antoine Dubé: There is a general purpose and three subsidiary purposes.

Mr. Milos Barutciski: Yes, that is right. So, ultimately, all those objectives are consistent. Section 1.1 states that the purpose is to maintain and encourage competition. This is why I say that they are consistent. However, at first sight, they may appear to be conflicting in specific instances. That is why it is vitally important to remember that the purpose of a competition legislation and a competition policy is to foster competition in the market and not to foster the interests of individual competitors.

Mr. Antoine Dubé: I agree.

Mr. Milos Barutciski: This is precisely what I was saying earlier to Mr. Penson. In politics, they have national champions and that kind of things.

Mr. Antoine Dubé: You are an expert in international trade and you carefully avoided naming any of the guilty countries earlier on. Could you tell us if there is one country where the competition legislation could be considered as the best model in your opinion? Does that exist?

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Mr. Milos Barutciski: Regarding models, I think we have a framework in this country. On this, I would agree with the commissioner himself. He appeared before your Committee last week, I believe, and I read his comments. He mentioned at least five countries or jurisdictions which are rather at the leading edge with their legislation: the United States, Canada, the European Community, Australia, Germany and a few others now. Great Britain recently passed a legislation which appears to me, after a first reading, to be very powerful, very solid. But they do not have the same background as we do.

I could mention a few countries which are slightly ahead, but the reason I am saying it would be difficult to point to a best model is that a competition legislation needs to reflect the historic, legal, cultural and sectoral contexts, in order words the most important industrial sectors of each country.

The U.S. model is extremely effective in the U.S. for various reasons, but if we were to use it in Canada, with private litigation, damages and compensations three times as high and the litigation and procedural mentality that you have in the U.S., the costs in Canada would soon become staggering. In fact, it would be counterproductive.

That model would never fly in Europe. The model used in the European Commission, with a committee in charge of determinations not only in the area of competition, but also in all the areas under its jurisdiction, is a model that could hardly be applied in Canada, where we have a Constitution and where powers are shared between the provinces and the federal government in specific instances; for the rest, it is slightly more controversial, as you know.

The lesson therefore is that there is not necessarily one model, but rather a set of principles that can be agreed on, such as this concept of promoting competition rather than competitors. You could also retain the concept of effectiveness and the idea that competition is not a goal in itself, but a means to reach more human goals. So you can retain those assumptions, but it is very difficult to say that one model is better than another, because, quite frankly, each model reflects the reality of the country in which it is applies.

Mr. Antoine Dubé: Unless this was done already—I came in a little late—I would like you, Mr. Keyes, to tell us a little about the Canadian Council for International Business and its membership. Who do you represent? What is your membership? What are your links with the government? I'm sorry, but this is the first time I've heard of your Council.

[English]

Mr. Robert Keyes: Sure, thank you. I'd be very happy to send you some information, our last year's annual report, which will give you a list of our committees.

The Canadian Council for International Business is the affiliate in Canada for two major international organizations. One is the International Chamber of Commerce based in Paris; the second is the Business Industry Advisory Committee to the OECD.

Under the OECD structure, there are two major advisory groups. One is TUAC, the trade union side, so labour; the other is the business side. Underneath the business side in each of the 29 member OECD countries, there's a business organization that provides input to this BIAC, as we call it, secretariat based in Paris. So the CCIB is the affiliate in Canada for both of those.

We have a mandate that focuses very much on international trade issues—what's going at the WTO, the OECD, the United Nations, and in various international organizations. We cover the gamut of issues from trade and investment policy, environmental issues, competition policy issues, transportation, banking—all the areas in which the OECD and the ICC are involved. We try to mirror them and provide Canadian business input into these organizations and the work of these groups.

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I'll send you last year's annual report. We're just working on our current one, which will be ready in a couple of weeks. I'll send them along to you and it will give you an idea of what we do.

In terms of membership, we have a variety of large companies—and our membership is concentrated on the larger companies, companies with international business linkages—a variety of law firms, and people who are very much involved in the international trade environment.

One of our most active areas at the moment is electronic commerce and international telecommunications. We've been very involved in that particular file and we have a very active committee working on those issues as well, providing input from the business community.

Milos, you just reminded me, the other important component of our membership is a variety of sectoral trade associations, which in turn are able to tap out to their very wide membership. So it gives us a very wide reach.

We are located within the offices of the Canadian Chamber of Commerce. We have a very complementary agenda. Some of our committees are joint committees, and by marrying the CCIB and the Canadian Chamber we are then able to reach right across the whole spectrum of Canadian business.

[Translation]

Mr. Antoine Dubé: Thank you.

[English]

The Chair: Thank you.

Mr. McTeague, please.

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

I didn't really want to begin with questions dealing with Madam Jennings' bill. I'm glad both of you are here today, and I welcome you.

I was interested in the composition, Mr. Keyes, of your organization. Without sounding unduly difficult with respect to the composition, it would appear from my reading of it and downloading the information that it is a who's who of the gentlemen's club of some of the largest firms in this country. Nowhere in there did I see how in any way, shape, or form the broader public interest could be represented, given the virtual powerhouse between the chamber and the Canadian Bar Association.

Earlier, Mr. Barutciski, you had suggested...

[Translation]

It is about Mr. Dubé's question on the best world model. A group of people have said that our Competition Bureau was less than efficient. Unless I am mistaken, those people included your own company, Davies, Ward & Beck.

[English]

Therefore, my question is a very simple one. Given the rather low marks they received, who is responsible for trashing the bureau? As you probably know from my reputation, I'm not exactly a big fan of the Competition Bureau. I think some changes are needed there. But two stars versus the American four stars... Other jurisdictions received much higher, and there were some that received lower. Do you have any idea, any suggestions or comments as to how and why this occurred?

Mr. Milos Barutciski: Well, I'm not in the business of trashing the bureau either, as you can imagine. I'm in the business of dealing with the bureau. Having been a bureau official myself, and knowing many of the senior and junior people, and everybody in between, right down to the mailroom clerks, on a first name basis for over ten years now, the last thing in the world I want is to trash them. They have an extremely difficult job to do, and as you know and have pointed out on several occasions, they do it with some fairly modest resources in the greater scheme of things. I'd be the last person to want to trash them.

Let me go to your questions. The first question, I think, was the suggestion that somehow my firm Davies, Ward and Beck was linked to the global competition review. I think that was the organization that did the—

Mr. Dan McTeague: Yes, they're on the back side, actually.

Mr. Milos Barutciski: I've seen it. I know the survey you're talking about, the review, and I can assure you categorically, on behalf of myself, my firm, and my partners in our group who practise in this area, that none of us had input into that survey. We were not part of whoever the cast was, the people who were consulted.

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Mr. Dan McTeague: Mr. Barutciski, I am impressed, and I defer to your knowledge in terms of your international works, but I am interested in your representation with Superior Propane. It's an issue that has been of concern to me, as well. Your concern was about the resources that have been expended in this area. From the point of view of a reasonable person on the street, it would appear that when you allow a virtual monopoly, even within the context of all the hundreds of pages of guidelines and enforcement guidelines I'm reading here with respect to mergers, it would appear that Superior Propane is a no-brainer.

Did you represent Superior Propane, or did you represent any other clients with respect to that?

Mr. Milos Barutciski: I was the lead competition counsel on Superior Propane. I noticed in your comments last week you suggested one of my partners had litigated it. I was the lead competition lawyer, and one of my litigation partners, Neil Finklestein, was the lead litigation lawyer on the file. I'm not going to litigate or re-litigate; that's done. We've spent a lot of time and a lot of money.

Mr. Dan McTeague: I understand.

Mr. Milos Barutciski: But let me answer your question, Mr. McTeague.

You suggest that as a layman it's a no-brainer that this merger is somehow detrimental to the public interest. That's precisely why we have a competition law, rather than executive fiat to allow or disallow mergers. Competition law depends on economic analysis. The application of competition law depends on the evaluation, thorough analysis, and ultimate weighing of the evidence, some of which can be contradictory. That is why we have a competition tribunal, courts, and a process of the sort we have, not just in this country.

In every single one of his questions, Mr. Dubé asked me if there was a best model. I said there wasn't a best model. But one of the important elements—and I didn't mention it to Mr. Dubé—is impartial adjudication, because the matters are very complex and sophisticated, and what may seem at first glance to be two big players merging into a quasi-monopoly may, when you poke around a little closer, be quite different. So if anything, Mr. McTeague, I suggest you actually take a look at the pleadings and evidence in that case. We'll see the decision in a few months.

Mr. Dan McTeague: You've read my comments and I've read a number of them in that context. I'm interested in your comments on mergers, in general. We have a pattern that appears to lend itself to scrambling of the eggs. That makes it virtually impossible, once a decision is made that might ultimately uphold the view that the merger should not have taken place... We cast a number of examples, Superior Propane may be one and Sobey's may be the other, where by the time the decision is made the damage is already done and you can't bring these parties back to what their original form was.

Could you comment on that? It obviously may not occur in other jurisdictions, but it seems to be a growing problem in Canada.

Mr. Milos Barutciski: I think you've identified a real issue in competition law. It's one that almost every competition act I'm aware of tries to address in some way. This is the issue of scrambling of the eggs in the merger context. I agree with you on the basic proposition that when two or more parties propose to merge or enter into a transaction that will mix their assets and activities, there is a risk the final decision will be ineffective, if you don't do something to stop or slow down the process before there's a thorough review and a decision on the merits. That is why, in the Superior case, we entered into a “hold separate” order on consent with the commissioner.

In that instance, I had been negotiating for some months with the commissioner on precisely finding out some way of doing this kind of merger subject—the hold separate. The commissioner didn't want to hear of it. So my client availed itself of its right to give the bureau almost a month's notice that we were intending to close on such and such a date, and the bureau availed itself of its rights and powers. The commissioner brought an application for injunction.

The application was thrown out of court. They got nothing, not even a hold separate. Even though we won, we offered up before the court a hold separate, and within a week consented to a hold separate. So in that case the eggs have not been scrambled. ICG and Superior are two independent companies with independent staff, and there are safeguards.

There may instances when companies rush to merge, but the tools are there if the commissioner diligently applies the statutes to stop it. The recent amendments to the act you sent me improve that situation.

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Mr. Dan McTeague: I am interested in that, because I see this occurring. It's certainly the case with Sobey's, where IGA and the Oshawa Group have now, for all intents and purposes, removed the signs. The administration has been let go and the executives are no longer there. Although there has been a hold separate in that case, for all intents and purposes they are operating as one company. I noticed, for instance, next to my riding in Whitby a large facility has already been built, a warehouse. We know it's a Sobey's facility, but it doesn't have the Sobey's name up on top yet, because the deal has not been given the final blessing.

My final question, if I may be permitted, Madam Chair, is a very brief one.

The Chair: Very quickly.

Mr. Dan McTeague: Do you have any comments with respect to... I don't think it was Mr. Pitovsky. I think it was his counterpart at the ATD who suggested not too long ago—and we raised this with respect to the former Bill C-235—that the elimination or the loss of competitors does indeed have an impact on competition. Now, that doesn't square, obviously, with many of the testimonies that have been given quite often by members from the bar and the chamber that we don't want to be protecting competitors.

Why is there such a divergence in the American attitude toward elimination of competitors as being a key element to the breaking up of competition or the downgrading of competition, while in Canada we take this—if you'll pardon my expression—holier than thou view that competitors be dammed, competition is what we're looking for? How do you achieve that end?

Mr. Milos Barutciski: Your question is a short one perhaps, but it goes to some of the core issues in antitrust law and antitrust policy, and frankly, the discipline of industrial organizational micro-economics. So I'm not going to do justice to it; I'm going to try to give you a short answer if I can.

The idea that reducing the number of competitors reduces competition is intuitively appealing. It's intuitively appealing in the sense that it goes to only one dimension of competition, and that is the narrowly cast rivalry between more than two players.

But there are other dimensions of competition, dimensions that include the strength of the individual players and the barriers to entry. In other words, there may be only one or two players in an industry, but if the barriers are low and anybody can get into the business and take off with little cost, then it doesn't matter that there's only one, if I can literally get into the business tomorrow with a modest investment and get out if it doesn't work out.

So there are many other aspects and dimensions of competition.

In regard to Mr. Pitovsky, or whoever it was at the U.S. who made the comment—I'm not sure, but I've heard that comment before—I don't disagree with it as a characterization of one dimension of competition.

What I would suggest is... And I'll finish on this. Mr. Dubé read to me section 1.1 of the Competition Act, which is the purpose clause. That purpose clause points out very clearly that competition is not an end in itself; competition is a means to a number of subsidiary ends.

So from that perspective, if we can achieve efficiency, product choice, prices, consumer choice, an opportunity for small and medium-size businesses, and an opportunity for Canadian business to engage in business abroad, and vice versa, in a particular context that has a fewer number of players... That is why competition law can be sometimes so nitpicky and difficult to understand from a purely lay point of view. The analysis is very fact- and case-specific.

Thank you.

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

Mr. Keyes, do you have some comments you want to make?

Mr. Robert Keyes: Yes, I just want to make a brief comment on Mr. McTeague's opening remarks on our membership. We are a business organization. We represent the views of our members on the issues of the day. Business is a very important and legitimate part of the public policy discussion process, and I don't apologize for the role we make. I think if you look at our track record on many issues, you'll find we've taken a very responsible position on a variety of issues. So we are performing a role on behalf of our members where their interests are involved, and we communicate that. That's our role and our job.

The Chair: Okay, thank you.

Thank you very much, Mr. McTeague.

I want to thank Mr. Keyes and Mr. Barutciski for being here this morning. We appreciate very much your opening comments, and the discussion has been very interesting as well. We obviously have a difference of opinion around the table, so our report is going to be very interesting. We do look forward to that down the road, and we hope you'll read it as well. We also hope you'll have your written comments to us within a couple of weeks.

That being said, the meeting is now adjourned. Thanks.