INDU Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 16, 2000

• 0936

[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 welcome here this morning Professor Roger Ware, Faculty of Economics, Queen's University. I'd just like to let you know, Professor Ware, that all of our meetings are recorded, and members have access to that. Some members will be coming in as the morning goes on. There was a memorial service for departed parliamentarians this morning. Some are still at that, but they will be joining us shortly.

We know your time is very precious, and we appreciate your being with us. There's a possibility of votes this morning, which will throw another kink into our plans. But we'd like you to begin with your opening comments, if you would.

Professor Roger Ware (Faculty of Economics, Queen's University): Thank you, Madam Chairman. I want to thank the committee for inviting me to appear and comment on the workings of the Competition Act and the proposed amendments to it.

I've worked for my entire professional career in industrial economics, industrial organization, and competition policy, including a stint at the Competition Bureau as the holder of the T.D. MacDonald Chair in Industrial Economics. I recently published a major textbook on industrial organization, with a large section devoted to competition policy and antitrust economics. Also, a few years ago I published a lengthy survey of abuse of dominance cases and the abuse of dominance provisions of the 1986 Competition Act, and I have made some copies of that survey available to members of the committee.

I want to start by making some general points. My view is that the 1986 Competition Act has generally served Canadians well. The biggest threats that I see to its continued success do not stem from weaknesses in the legislation itself, but rather from lack of resources available to the Competition Bureau to bring and pursue cases where needed and to support those cases with skilled staff and support.

I am also a little concerned that there may be some erosion of the political independence of the Competition Bureau. The Commissioner of Competition is charged with enforcement of the Competition Act, and he should not be required to interpret the policies of the government of the day or in other ways be prevented from performing his duties in the investigation and enforcement of the act itself.

Moving on to the amendments to the act, I'll confine my opening remarks to a very few topics. Then, of course, I'd be happy to take questions or discuss any other issues concerning the act or amendments that you might want to bring up.

First of all, a major issue that is part of some of the proposed amendments is the introduction of private right of access to the Competition Tribunal. Generally speaking, I believe this is a move to be welcomed. It is in a sense akin to a fundamental principle that those parties injured by abuses of competition, or anything else for that matter, should have the right to sue for redress.

Second, for reasons associated more with the public interest, I believe private access may be of benefit to Canadians in general.

• 0940

The Competition Act is starved for case law. I'm not the first person to make this observation. We've only had five major abuse of dominance cases, and we haven't had any for five years since the Nielson case. Given that the act itself is young, it's rather difficult to build up a mature jurisprudence and a mature set of interpretations of what practices are and are not illegal.

A question, which I will perhaps address a little more, is, why is that? Why is it that so few cases have come before the tribunal? I'm not sure myself. I think part of it is due to the lack of resources that have been available to the Competition Bureau. I think part of it has been that many senior officers in the bureau have been, let's say, of a less interventionist mind in terms of certain anti-competitive practices than is perhaps the current view among most antitrust economists.

I think it would be good if we got the introduction of privately brought actions. Hopefully, that would build up a bigger portfolio of decisions and a body of case law, which I think is badly needed.

I do have some qualifications about this rather optimistic view about private access. We should not underestimate the importance of the role of the Competition Bureau in case selection and in a sense in acting as a gatekeeper to the tribunal. The bureau has a very large number of qualified and specialized officers, who often have worked for months and sometimes years on investigations before filing an application before the Competition Tribunal. A private plaintiff will not be able to match the extent and scope of those investigations and probably will not have the incentive to do so.

It's also true that the Competition Tribunal is rather underweighted in resources compared with the bureau itself. What concerns me a little bit is that we're removing the one agency here that really has the ability and expertise to act as a filter for frivolous investigations and we're kind of letting the private plaintiffs in the tribunal arbitrate competition law, which, as I said, in principle is a good thing, as long as there's enough quality of resources going into the whole process.

One thing that concerns me in particular—and this goes to the whole issue of what's to be done about sections 75 and 77 on refusals to deal and section 61 on price maintenance—is that, in my view, section 75, for example, which covers refusals to deal, is not a well-written section of the act to begin with. In particular it is essentially what we call a per se prohibition. It says that if a firm can establish that a manufacturer or supplier has refused to supply that firm, then that violates the act. It doesn't say we have to establish that action lessens competition. There's no substantial lessening of competition or what is usually called a competitive effects requirement in section 75.

Of course, the way that has been interpreted up until now is that the commissioner, acting as a gatekeeper, has prevented frivolous prosecutions under section 75. But once we allow private access, that's not likely to happen. We would undoubtedly get private prosecutions in cases where the refusal to deal was probably, or could have been, pro-competitive.

• 0945

I have a few remarks about predatory pricing.

I disagree with some of my colleagues in the economic profession in that, in my view, predatory pricing is not a phenomenon that's never observed, or almost never observed, which was the consensus among antitrust economists until, let's say, five or ten years ago. In my view, predatory pricing is an activity that is a common, although not frequent, part of the business landscape.

That doesn't mean I disagree with my colleagues about cautioning against overzealous application of the laws against predatory pricing. It's still true that true predatory pricing, that is, low prices that are designed explicitly to cause the exit of a rival firm, is very difficult in practice to separate from low prices that are part of big-risk competition that should be encouraged by competition law.

It's also true that even if we could establish that a dominant firm was engaged in predatory pricing designed to drive out an entrant, a smaller rival, it's also true that it's not necessarily bad for economic efficiency. I stress again, as I'm sure others have done here, that the purpose of competition policy and competition law, in my view, is to protect competition and economic efficiency, not to protect competitors. It's to protect the efficiency of the process, not the existence or the viability of individual companies.

For example, if a large dominant firm engages in, let's say, a pricing campaign that could be construed as predatory, designed to drive out a small rival firm, if that firm has higher costs, it may actually improve total efficiency to achieve the exit of that firm. In some sense, that is what normal competition is all about: low-cost, high-efficiency firms driving out the less efficient firms. That's what we should seek to encourage.

As a comment on the legislation on predatory pricing, we have paragraph 50(1)(c) of the Competition Act, which covers predatory pricing, and I have a concern about the wording of that legislation. I'm going to make a more general statement in a minute, but that legislation basically has several substitute requirements for a finding of predatory pricing. One of those is selling at prices that are unreasonably low, having the effect of eliminating a competitor.

Once again, that doesn't have a competitive effects test to it. It simply says if you eliminate a competitor or you intend to eliminate a competitor, then that can be sufficient for a finding of anti-competitiveness or a violation of the act.

Again, in my view, that's not the purpose of competition law. The purpose of competition law is to protect competition. Eliminating a competitor, even though it perhaps sounds contradictory, is not necessarily a bad thing for competition, defined generally as total economic efficiency.

• 0950

So I would prefer to see the deleting of those words or that sufficient condition for predatory pricing. I don't think the words “eliminating competitor” are sufficient for a finding of anti-competitive predatory pricing. My preference in fact would be to eliminate paragraph 50(1)(c) altogether and to use section 79 of the act, the abuse of dominance provision, to cover predatory pricing, because I generally feel that the civil provisions are a better and more efficient way of dealing with most anti-competitive practices, and predatory pricing is covered by section 79 under abuse of dominance.

In the NutraSweet case, which is covered in my article, there was an allegation of predatory pricing against NutraSweet, although the competition tribunal rejected it, but in that rejection they did agree that predatory pricing cases could be brought under section 79 of the act.

One of the things I feel strongly about in regard to predatory pricing—and this is particularly true in airlines at the moment, but concerns could arise elsewhere—is that people are concerned that there has been no enforcement. We need to act because there has been so little enforcement. We have only two cases on predatory pricing, and both of those are more than 20 years old.

One point I want to stress is that I believe the lack of successful cases against predatory pricing in Canada is not a result of any weaknesses in legislation. I think either under the existing paragraph 50(1)(c) or under section 79, many successful cases could have been brought over the last 20 or 25 years. The real reason for a lack of enforcement was because the majority of the economics profession, who had some influence on the Competition Bureau, didn't believe predatory pricing was a significant problem. It was believed to be extremely rare, or rare to non-existent. If you look at any industrial organization textbook dating from ten years ago or so, you'll find that's exactly what it will say.

There has been a bit of a change of view by the economics profession over the last ten years. Certainly a substantial number of economists now believe predatory pricing is quite possible. As I said, it's a common but not frequent part of the landscape. But enforcement has not caught up with this change in the economic analysis of this practice.

The Chair: Professor Ware, could I ask you to wrap up? We have some questions for you.

Prof. Roger Ware: Yes, I'm sorry, I'm taking longer than I thought.

The last point I want to make in my opening remarks concerns the proposal for temporary cease and desist powers for the commissioner. This is, of course, in Bill C-26 for airlines and also in Bill C-472. I am very concerned about this. I think these cease and desist powers, which give the commissioner power to prohibit an action for up to 80 days with renewals, really turn competition policy on its head. We've had a judicial process ever since the beginning of competition law, and so have all the other major jurisdictions, and I think it has worked well and served Canadians well.

• 0955

What this process does is allow the commissioner to be both prosecutor and judge, at least for a period of time, and I believe it could cause substantial harm to legitimate business activities, with little recourse for recompense.

Perhaps I should stop there.

The Chair: Thank you very much.

Mr. Penson, please.

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

I'd like to welcome you this morning, Mr. Ware, to the committee to study this whole business of expansion of competition law.

I think you referred to the predatory pricing action. Well, maybe I'll back up a little bit. You talked about private access and what that might do in helping to establish some more case law, I believe.

Prof. Roger Ware: Yes.

Mr. Charlie Penson: But surely that's not a goal in itself. If there's no real need out there and if there's no case law developed because there haven't been many cases brought... I guess there are probably several reasons, one of which might be that there simply haven't been grounds to bring cases forward.

Prof. Roger Ware: Yes, that's absolutely right. That is a possibility.

[Editor's Note: Inaudible]

A voice: —

Mr. Charlie Penson: Excuse me. Please keep your comments to yourself.

[Editor's Note: Inaudible]

A voice: —

The Chair: Can we have order, please?

Mr. Charlie Penson: I think the order should come over there.

The Chair: I asked for order.

Mr. Ware.

Prof. Roger Ware: That's certainly a well-posed question, and I don't think we know the answer to that, but it is reasonable to believe we have a shortage of cases relative to what we should have. We've had the modern Competition Act for fifteen years now, and we've had basically, as I've said, five abuse of dominance cases, and I'm not sure of the total number, but very few contested merger cases, just a handful of them.

I take the view that the way to develop jurisprudence is essentially to test these things out in the courts, and one of the things private actions will do is achieve that. In particular these practices such as refusals to deal, vertical arrangements, and tied selling are the areas where we have no case law at all. We simply have no cases. So getting the tribunal on the record on those practices would be an advantage.

Mr. Charlie Penson: Professor Ware, I think you've said it's a fairly extensive process to go through, and as for whether individuals would bring these things forward or not, I guess we'll just have to wait and see. But if a lot of cases were brought forward...

You talked a little bit about frivolous action. Right now the competition commissioner screens some of these for that concern. How would you handle frivolous actions under private access so that companies were not being harassed? What kinds of safeguards could be put in place?

Prof. Roger Ware: Actually I like the suggestions that have been made. I believe in some of the proposed amendments—I can't recall which ones—there is a proposal for the award of costs, for example, which is a constructive suggestion. That could be a discipline on the Competition Bureau as well as on private plaintiffs. Also the possibility of summary disposal of cases is contemplated, and that's a constructive suggestion too, so that the Competition Tribunal could in fact make a decision very quickly on a case they decided was frivolous.

Mr. Charlie Penson: I wanted to get into the predatory pricing aspect. You said it's fairly difficult to prove a company is really trying to drive a competitor out of business, versus what might be just the normal business practice of trying to get prices down. It seems to me that would be awfully difficult to prove, short of through the company's minutes of meetings with the president and so on. How would you determine there's a motive to drive your competitor out of business?

• 1000

Prof. Roger Ware: There is a large literature on this in antitrust economics. The way an economist typically tries to do this—and I'm not suggesting it's easy—is first of all to steer away from intent, because intent is not the kind of evidence we as economists like. What have developed in the economics literature are various cost-based tests, none of which are entirely satisfactory actually, but the idea is to try to establish whether or not the predator is pricing at a level that is below their own costs in some sense.

There's a very difficult question about what measure of costs you want to use, and there's a tremendous, long literature on this, but basically the argument is, if you can establish that a predator is pricing at a level below their own costs, it's hard to deny that they couldn't have been doing that for a legitimate business reason. That's the argument.

Mr. Charlie Penson: Can I just stop you there? I disagree. Over a long period of time that may be the case, but over a short period of time there may be cases where they have to recover their fixed costs.

Look at the case that was brought against us in the dumping issue with Canadian cattle, for example. The United States took dumping action against us. Canadian cattle feedlot operators bought cattle to put into feedlots at a certain price, and the market moved against them. They had a commodity that needed to be sold—a perishable commodity, if you like—and in the meantime the price had gone down, so they were selling below cost.

I'm sure there are other businesses that may occur in too.

Prof. Roger Ware: Absolutely. You're absolutely right. Selling perishable inventory is a good example of a case where selling below cost is perfectly a legitimate business practice. That's why it's so tricky to determine these things.

For example, consider the case of airlines, which of course is one of some interest. It's not impossible to at least investigate seriously allegations of predatory pricing in airlines. If you look at the amount of capacity that's added to certain routes and if you look at the level of prices relative to costs, it is possible to build up a conclusion that a dominant firm is engaging in a set of activities designed for the purpose of driving out a competitor.

Mr. Charlie Penson: When Canadian Airlines was struggling for about ten years and basically doing business below their cost because they were losing money, they were engaging in predatory pricing?

Prof. Roger Ware: Well, no. I don't think they were selling below their cost, although they were losing money. The measure of cost that is taken as sufficient is the measure of variable cost. So I don't think Canadian Airlines was selling below variable cost for very long.

Of course if you have a firm that's failing, then it is possible they're selling below cost, but you wouldn't think of that firm as predatory.

Mr. Charlie Penson: But the market will look after that.

Prof. Roger Ware: The market will look after it, yes.

Mr. Charlie Penson: Okay.

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

Mr. McTeague, please.

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

Professor Ware, thank you for being here this morning. I will concentrate on two areas you have raised: predatory pricing and the cease and desist provisions you are concerned about.

Richard Parker, the ADD of the justice department of the United States, has stated on a number of occasions that the elimination of competitors is indeed an elimination or a breakdown of competition in general. Of course I'm paraphrasing what he has said.

• 1005

I'm interested in your concern about efficiency. If what we're really talking about in Canada, given the highly intensive nature of most of our significant markets... You've mentioned the airlines. I would mention gasoline and groceries and many others. How can the argument of efficiency be used, cantilevered against the American experience, where predatory pricing is not a problem? When Microsoft is seen as a predator, they don't have any difficulty setting aside what they consider the rather spurious argument of efficiency in favour of going after a monopolist and a predator.

I'm interested in how that reflects on Canada in the context of shifting it, as you suggested, to civilly reviewable, which most of us here understand as not having a general application, not having an injunctive effect, but rather as being adjudicated on a case-by-case basis. Are you concerned about the dearth of understanding of predatory pricing and its ability to reflect accurately in Canada what we are quite capable of doing in the United States?

Prof. Roger Ware: To begin with, I came at this from two directions, but I am in favour of more aggressive enforcement as a whole against predatory pricing.

But as I think I said in my opening remarks, I think the lack of enforcement is not, as I said, because of a weakness in the law; it's that the Competition Bureau has chosen not to pursue predatory pricing cases. I think they could have pursued some and probably could have obtained a favourable decision, but they haven't done so. I'm not against enforcement against predatory pricing.

Mr. Dan McTeague: I'm interested because you noted that it has been 20 years since we've looked into the two cases. Of course, you were referring to Consumers Glass and Hoffmann-La Roche.

Nozick, a colleague of yours, an economist and a lawyer, suggested that this section was not intended to make an offence of price cutting by one of two competitors to retain or gain a share of inelastic markets so long as the price cutting was loss minimizing, even if the effect was to drive the other competitor out of the market.

Do you feel that even if this were put under the abuse of dominance situation, we would still have to demonstrate, with a rather serious burden, that the pricing must be unreasonably low, must constitute a policy, and must have a deleterious effect on competition or a competitor? Do you still believe that the barrier in terms of having to make all of those provable makes it practically impossible to enforce and therefore takes away the effect of putting it under the abuse of dominance provisions?

Prof. Roger Ware: No, actually. I don't think we have any evidence. I mean, the problem is that we have no evidence at all. We don't know. I would argue not. I would argue that it's perfectly possible for the tribunal, in an application under section 79, to find in favour of predatory pricing in a case. Certainly in the NutraSweet case, which is quite a long time ago itself, they certainly made serious consideration of a predatory pricing case.

Mr. Dan McTeague: In the case of cease and desist, you were concerned about removal or an attack. I guess the word you used was that it ran contrary to the judicial process. I think that was the word you used. I find that interesting given that we have such a lack of jurisprudence on a number of areas that would otherwise be considered criminal activity.

You talked about your concern about harm to business in that context, that even though the legislation proposed in Bill C-26, and more extensively in my legislation, Bill C-472, would have an effect on due process, perhaps... I guess that's where you were heading.

What about small businesses that are eliminated, whose margins may only be 1% or 2%, for whom a two-week sustained abusive policy—call it what you will—might very well mean the end of them in two to four weeks, given the short credit terms, the circumstances, and the very tight, competitive economy? Do you not believe that the injury and the harm without those powers for the bureau might actually occasion removal of effective competitors?

• 1010

Prof. Roger Ware: Well, my view on that is that the primary purpose of competition law is to protect competition, as I've said, in that if we were to establish a framework of effective enforcement—through the normal channels, that is, either through the tribunal or through section 50—once the incentives are in place, once the framework is in place, then you have to rely on the fact that the law will deter predators from eliminating small firms.

Now of course it's possible that some small firms may be, as you say, driven out of business. I'm not denying that's possible; it is possible. But my view is that the dangers of subverting, if you like, the due process of the legislation are greater than the benefits of protecting a few competitors.

What we really want to do is try to get the framework right here. If we get the framework right, to a large extent we can hope to avoid that situation, because, in other words, if the law catches up with you in the end, then you will have the incentive. That's the whole theory of our justice system, I guess. You will have an incentive not to engage in predation.

Mr. Dan McTeague: I guess I'm also concerned about how we try to provide due process, as you can well understand, for small business. In almost every area, this committee has reviewed a number of cases—and will do so more extensively over the next few months, into the fall session—with businesses that have come before this committee and have suggested how it was that the inability of the Competition Bureau to effectuate, let alone appreciate, concern for the magnitude of the problem meant that effective competitors went by the wayside.

I guess our concern is to make sure that we do enhance competition, and very efficient competitors have something to do with that. That's why my question is really based on what I know, for instance, in the gas industry, where a number of small competitors with more efficient operations, with smaller margins, who could turn a profit or remain financially viable on smaller margins than their vertically integrated supplier, steadily found themselves eliminated in a number of markets across Canada by a practice of below-cost selling by their various suppliers.

In many instances, this didn't have to be sustained for a very long period of time, but of course by the time the bureau got the order and the tribunal was alerted to it, the damage had already been done. The effect in areas like Toronto, for instance, Professor Ware, is that margins at retail are now somewhere in the order of 7¢ a litre. Two years ago they were about 2¢ a litre.

How does an economist view this? We have the Chicago and Harvard schools that tend to examine how successful a predator may be. The normal thing is that the price will rise afterwards—after the predation has been successful. Is it not possible, however, that a successful, intelligent, smart predator, under a new school of economic reality, may actually not raise prices but may in fact simply enjoy a larger market as a result of their success, particularly in a vertically integrated scenario?

Prof. Roger Ware: Well, the key is always barriers to entry. It's what will prevent the re-entry of smaller companies or other companies once the period of predation is finished.

One of the cornerstones of modern predatory pricing enforcement—in the United States, at least, where they actually have some sort of jurisprudence on this... I guess there are two things. One is to establish that there are barriers to entry so that it is simply not possible for new entrants to come along continuously, even if some of them are eliminated. The second is the notion of recoupment, the notion that no firm will engage in predatory pricing unless they can expect a period of monopoly profits or some sort of monopoly gains that will follow a successful campaign of predatory pricing.

So typically we like to look for those two things, and only if we can find those two things would we be willing to accept that what you're looking at is genuine predatory pricing.

Mr. Dan McTeague: Have you found that—

The Chair: Last question, Mr. McTeague.

Mr. Dan McTeague: Thank you, Madam Chair.

Professor, have you or has anyone from your faculty done any studies in the gas industry since 1996, say, by region, other than what's been supplied by the oil industry, in terms of looking at those margins and the fact that there have been no new entrants into the marketplace?

Prof. Roger Ware: No, I haven't. I don't know of studies.

Mr. Dan McTeague: Okay. Thank you.

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

• 1015

[Translation]

Mr. Dubé, please.

Mr. Antoine Dubé (Lévis-et-Chutes-de-la-Chaudière, BQ): I did not have time to read your entire article, but I know that in it you speak a great deal about the abuse of dominance. I understand what you mean by abuse of dominance and I understand the Act as well, but there is one aspect that is not discussed very much, and that is vertical integration.

My example is from the agri-food area: pork. It is still possible for producers and breeders to own farm land, yet at the same time control the production and selling of animal feed and also operate a slaughterhouse. You know what integration is. And yet, to my knowledge, the Competition Act does not mention vertical integration.

Can we speak of competition in such a case? Should this practice not require further controls? I am speaking of this particular area, but we could just as easily speak of a refinery that controls gas stations as well. Is this not a practice that should also be restricted in the name of competition and efficiency?

[English]

Prof. Roger Ware: The general view in economics is that unless there are reasons to think otherwise, vertical integration typically proceeds because of efficiency reasons. Take the example you suggested with cattle. We can also think about the oil industry. Vertical integration typically proceeds because there are efficiency advantages to merging successive stages of production within the same enterprise. To the extent that this is true, of course, that's something we should encourage as a society.

• 1020

The only dangers in vertical integration arise from a competition point of view, if vertical integration is done for strategic or anti-competitive reasons to try to squeeze out competitors. We can look at Mr. McTeague's example of independent gas stations that might be squeezed out by vertical integration.

Even though the Competition Act doesn't explicitly mention vertical integration, those practices are certainly reviewable under section 79 as anti-competitive practices. If you think there has been a squeeze of a supplier to try to drive out suppliers, it's perfectly possible to bring a case under section 79. It's also possible to bring one under section 75, refusal to supply, if a firm downstream in the process finds it difficult to obtain supplies from a vertically integrated upstream producer, for example. If there is an anti-competitive component to those practices, they're certainly covered within the act.

Again, it comes down to the question of enforcement. Do we think there has been enough enforcement? I would probably be neutral on that question. As I said at the beginning, I generally feel that most vertical integration occurs because of efficiency reasons.

[Translation]

Mr. Antoine Dubé: I have been an MP for seven years, and, to my knowledge, only two cases have been submitted to the Tribunal, and each time it did not reach that stage. In one case where a sale was refused—I recall the company very well—it took a year and a half to get an answer, and eventually, the company in question went bankrupt, and because there was a bankruptcy, that was the end of that. You spoke about the number of cases. I do not know whether there have been many complaints dropped because of the time involved. How can we reduce the time that it takes and make it more efficient so that people who complain about a situation, even if they do not necessarily win their case, can at least have the right to have their complaints examined?

[English]

Prof. Roger Ware: I think some of the suggestions that have been made should help with that. Of course the most significant would be the right of private action. If a company that is the victim of a refusal to supply is able to bring an action itself to the Competition Tribunal, that should substantially shorten the time period to obtaining redress. I'm supportive of that. I think that's an important step.

That doesn't mean they will necessarily win. They won't necessarily get a favourable decision at the tribunal, but at least they have access. At least the case will be heard, and fairly quickly as well.

[Translation]

Mr. Antoine Dubé: I admit that I'm not an expert in this area. As few cases have been submitted in my district, I concerned myself less about this than other areas, but would it be possible to take joint action? Often, what is involved are very small companies that do not have the means to take action, but who all have a bone to pick with the same major firm. Perhaps this happens here. If not, would this be a useful method?

[English]

Prof. Roger Ware: This is not a particular area of expertise of mine either, but the answer is yes. To my knowledge, there's no reason at all that several companies can't bring a joint action, under either the existing framework or the proposed private actions.

• 1025

Again, I'm not a lawyer, I'm an economist, but we also have these class actions that are starting to respond to that kind of problem in Canada.

Mr. Antoine Dubé: Merci.

The Chair: Thank you, and thank you very much, Mr. Dubé.

Professor, in your opening remarks you referred to the principle that private litigants who are injured by anti-competitive behaviour should have recourse to the tribunal. One of our previous witnesses, Professor Michael Trebilcock, has gone on record as saying that he supports the principle that a litigant should have the right to claim at least single damages. Other witnesses who have spoken on that same subject matter at the committee seem to think that damage actions will result in a flood of litigation.

I'm just wondering, do you have a comment on that?

Prof. Roger Ware: That's an interesting question. It's not one that I can claim to have thought a lot about. However, economists believe people respond to incentives, so the larger the damage provisions, if we make damage provisions, the bigger the response will be. They have treble damages in the United States, of course, and there's a huge number of private actions under antitrust law.

I would say that perhaps some form of damages is desirable. As I think somebody said here, these actions are very costly for all sides, and even if there's a right of private action with no damages, there will still be a reluctance on the part of some parties to bring such actions, I think, without some award of damages. But I don't think I would support treble damages.

The Chair: Okay.

You also talked in your opening comments about the fact that senior officers at the bureau may be less interventionist than in other jurisdictions, and I know there's been some further discussion on what's been happening. We also had a witness, Professor Ralph Winter, and several other economists who maintained that predation is rare, that it only exists where specific market conditions exist.

Does your opinion on that differ?

Prof. Roger Ware: No, I think predation is... Well, I perhaps wouldn't use the word “rare”. I would say anti-competitive predation is rare but not unknown. I think we have the means to vigorously enforce against it. As I said, I don't think we've been doing that.

So I would substitute “uncommon but not unknown” for the word “rare”.

The Chair: Okay.

I understand, Mr. McTeague, you have one brief question.

Mr. Dan McTeague: Very brief, Madam Chair.

You may be able to respond to this by letter a little later on. I'm looking at the price discrimination enforcement guidelines. We know that doesn't apply to the sale of services, but I'm intrigued by the fact that it does not apply to those involved on the purchasing side.

Of course, you might understand the concern this committee has had with respect to slotting fees. I was wondering if you might be able to possibly give us an analysis or perhaps your observations with respect to slotting fees and the shortcomings of section 50, and whether those shortcomings would be helped or hindered or addressed if we shifted this over to abuse of dominance, civilly reviewable.

Prof. Roger Ware: When you say “slotting fees”, you're talking about...

Mr. Dan McTeague: Shelf fees—supermarkets or manufacturers being charged a certain amount in order to put a product on shelf per stockkeeping unit.

I guess I'm driving at oligopsony and monopsony as opposed to oligopoly or monopoly. I don't want to play games here with the terms, but I think as an economist you'd appreciate the difference. It's not covered in the act.

Prof. Roger Ware: Sure.

I can see no reason why it shouldn't be. Again, I'm pretty cautious on whether price discrimination is generally anti-competitive, because quite often it's pro-competitive, but I see no reason at all, absolutely none, why it shouldn't be covered on the buyer's side as well as on the seller's side.

The Chair: Professor Ware, we want to thank you very much for being here this morning. I don't know if you have any final parting comments you want to leave with us.

• 1030

Prof. Roger Ware: No, I would just like to thank you for giving me the opportunity to come here.

The Chair: Thank you.

We are going to suspend while we change witnesses. We have another group of witnesses who will be appearing.

I'd ask members to try to stay close by, because we'd like to begin as quickly as possible.

• 1031

• 1035

The Chair: I call the meeting back to order. We're very pleased to welcome our next group of witnesses. We have with us today, from the Communications, Energy and Paperworkers Union of Canada, Ms. Gail Lem, the national vice-president of media; Mike Bocking; and André Foucault. From the Graphic Communications International Union—there's a change on your sheet—we have Mr. Alan Tate, who's the international representative.

So without further discussion, I will turn it over to the two groups for their opening statements. Each group will give their opening statement, and then we'll move to questions together.

We'll begin with the Communications, Energy and Paperworkers Union of Canada. I assume it's Ms. Lem.

Ms. Gail Lem (National Vice-President, Media, Communications, Energy and Paperworkers Union of Canada): Yes, thank you. Actually, we have worked on a joint submission, which you have before you. I propose to take you through it and then turn to my colleagues for other input. Is that appropriate?

The Chair: It's appropriate, provided we have the time. You're welcome to begin your opening comments. I thought everyone was told opening comments would be about 10 minutes. We have about 20 minutes in total for opening comments. I don't know if you can get through this in 20 minutes, but I'd be more than happy to let you begin.

Ms. Gail Lem: Okay. I'll just start. You'll see in the introduction I introduce us and talk a little, on page 2, about who we are—both the CEP and the Graphic Communications International Union. So there is some background there.

I would like to say that on behalf of CEP we represent journalists and other editorial employees at newspapers ranging in size from some of Canada's largest papers, such as The Globe and Mail, The Toronto Star, The Vancouver Sun and Province, to some of the smallest. Besides journalists, we also represent employees in other departments of the newspaper.

The Graphic Communications International Union, while historically a union of press room employees, is also now an industrial union that represents an entire range of workers throughout the newspaper.

Almost all of us here before you have worked in the media. I was a reporter for the Report on Business Magazine at The Globe and Mail for 15 years; and my colleagues are also former newspaper employees.

We understand that the mandate for these hearings is to examine the implications of the sale of Thomson Corporation's newspaper holdings, except for The Globe and Mail, and the focus is limited to the Competition Act.

We have to say at the outset that we agree with the conclusion reached by the Kent Commission in 1981 that the competition laws may not be the best way to regulate newspaper ownership. In fact, as these laws currently stand, they have failed to do so.

The news media is not a business just like any other. Its product is a powerful one that influences political, social, and economic policy. This fact remains true despite the efforts in recent years of media owners and newspaper publishers to distance themselves from it, perhaps to justify the pursuit of profit at the expense of quality journalism.

The fact of the matter is the media continue to present themselves as responsible watchdogs for the public interest. The media does have a tremendous impact on our society. The extreme concentration of corporate ownership in the news media may or may not have consequences for advertisers.

Typically, the Competition Act looks at commercial interests. The extent of corporate concentration in Canada is unparalleled in any of the western liberal democracies. There are extreme consequences for journalists, for employment, for readers, and for democracy.

• 1040

We'll be recommending, as we go through this brief, that certain provisions of the Competition Act be amended so that the act may deal more effectively with the critical issue of monopoly ownership. But because we understand that the scope of this hearing is limited, we will also be recommending that this committee recommend that the heritage committee embark on a more comprehensive review of media ownership.

Nearly 90% of daily newspapers in Canada are controlled by large and powerful newspaper chains. Only a small fraction of independently owned newspapers remain, and there is only a handful of cities across the country where there are competing English language or French language dailies. This is a stark difference from 1970, when the Davey committee on the mass media reported that independent daily newspapers controlled 40% of English-language newspaper circulation and 50% of French-language newspaper circulation.

Today, independent newspapers represent less than 4% of English-language daily circulation, with one chain, Conrad Black's Hollinger, controlling 45.4%. This means almost half of the readers of daily newspapers in Canada get their information from the same source. There are three other large chains—Quebecor Inc., Torstar Corp., and Thomson Corp.—that control the remaining 50% of English-language circulation. In the French-language market the situation is similar, with Quebecor controlling almost 45% of daily circulation.

At the regional level, the level of monopoly ownership is simply appalling. In four provinces, one owner controls the entire daily newspaper industry—the Irving family in New Brunswick, and Hollinger in Prince Edward Island, Newfoundland, and Saskatchewan.

At the local level, the situation is similar. In the major metropolitan market of Toronto, there are four English-language dailies, which makes Toronto one of the most aggressive news cities in North America. In Montreal there are three French-language dailies and one English daily. But leave those major centres and you have only a handful of cities where there's actually competition. Outside of those seven or eight cities, the major newspaper chains have simply eliminated the competition. They've bought each other out or closed newspapers.

Vancouver stands as the worst example—I don't know if I should say the best example—of the failure to enact legislation to prevent the unabated growth of the newspaper monopolies. It's the third-largest market in Canada, and both daily newspapers are owned by Hollinger. The province itself is a near-monopoly, with Hollinger controlling 95% of the circulation. I know my colleague, Mike Bocking, will want to speak about that, as he deals with that situation on a daily basis.

The growth of chains has extended to the community newspaper level. This is something that is not talked about that much, but the fact of the matter is that when you look at community papers, you see again Hollinger or subsidiaries of Hollinger and other chains with large market shares.

I want to talk a little bit about the effect on our members who are journalists. If you talk to a journalist, you will uncover a quiet fear about the state of journalism in Canada and the quality and integrity of their craft. All of the concerns are magnified a thousandfold in the current climate of monopoly ownership. Journalists talk about a shocking narrowing of the journalistic agenda. The range of material that is deemed newsworthy has declined, and the resources for investigative journalism have virtually disappeared.

When large chains buy up newspapers, and especially when they buy up a large quantity at a time, the first thing that typically happens is that journalists lose jobs. The 173 firings that followed the Conrad Black takeover of the Regina Leader Post and the Saskatoon Star Phoenix were perhaps the most shocking, but they were not atypical. We have seen this everywhere, even at very small-market papers. I gave the example in the brief of the Niagara Falls Review, which had a very skeletal staff, and yet a third of the journalists were fired immediately after the Hollinger takeover. You have to look at the implications of this—first, why it happens, and second, the implications.

• 1045

It happens for a number of reasons. One of those key reasons is that large newspaper chains tend to minimize their newsroom costs and maximize their profits by extensive copy sharing among their newspapers. This is very obvious at the Hollinger chain. Again, as an example, newspapers that once sent their own reporters to cover Parliament Hill or provincial legislatures now pool their resources. The same columns and opinion pieces are run by newspapers across the chain.

The fact of the matter is that fewer owners in the newspaper business has come to mean fewer journalists and fewer newsroom resources. This has an impact on the quality of news and information that the public receives.

We saw throughout the 1990s—and I think it's important to understand this development from the point of view of journalists, so I've included a comment on this—more and more journalists turn to the union, not for the typical reasons of wages and so on, but as a bid to protect the quality and integrity of their craft. I've given some examples. The London Free Press, the Kitchener-Waterloo Record, and the St. Catharines Standard are some newspapers that come to mind where journalists identified the defence of editorial integrity as the key reason they were seeking to organize.

Today at the Calgary Herald, also owned by Conrad Black, more than 100 journalists have been on strike for a first contract for more than six months. This is the newspaper at which the term “drive-by editing” was coined and its journalists sometimes received assignments marked FOK, which meant “friend of King”—Ken King, the former publisher—and meant the publisher would like you to do a nice, comfortable story on this guy; don't be too critical.

The main issue at the bargaining table, the key reason behind our protracted dispute at the Calgary Herald, is protection for journalists from arbitrary discipline or dismissal when they fight to defend their journalistic principles. When you look at the landscape of newspaper ownership across the country, you have to ask to yourself, “Are the careers of these journalists over?” Having stood up for editorial integrity, where else would they find jobs? Would it be at the other 100 or so papers owned by Conrad Black? That's not likely.

I spent a few minutes in the brief talking about the special case of Winnipeg, because of the five Thomson papers that are now for sale, one of them is the Winnipeg Free Press. It exists in one of those rare Canadian cities that actually has competing dailies. The Winnipeg Free Press is up for sale. The Winnipeg Sun is a Quebecor paper. It became part of the Sun Media division when Quebecor bought out Sun Media.

I've just included these comments as an example. It is a fairly stark example of what happens under monopoly ownership in the newspaper business. You will see that Winnipeggers no longer run the paper. The Calgary Sun staff have been parachuted in, so have the Calgary Sun and the Toronto Sun opinions. Nearly all of the opinion columns in the Winnipeg Sun are from other papers.

I've given some examples of what happens within the paper and I've given examples from the entertainment department. What we see is that even beside opinion pieces, Calgary and Toronto news crowds out Winnipeg news. Last summer, for example, there was a small tornado in Toronto. The Winnipeg Free Press carried a small story in its national news, but it was the Toronto tornado that was front page news in the Winnipeg Sun. Winnipeggers might be forgiven for seeing this as yet another ill wind from the centre of the universe.

Now we have the Winnipeg Free Press up for sale. Who's interested in buying it? Quebecor, who already owns the Winnipeg Sun. With the other big player being Hollinger, we see again another threat of increased concentration if this newspaper is bought by either of those two major players.

• 1050

I've talked a little bit—and I hope you'll reread this brief—about some of the financial resources or the lack of resources even at the Winnipeg Free Press and how that affects the quality of journalism that is provided by the paper.

When Thomson announced the sale, several community organizations in the city of Winnipeg and our two unions expressed an interest in buying the Winnipeg Free Press. We eventually put in a bid to buy all five of the Thomson properties that were up for sale. Our bid was rejected. This is understandable. We could not afford to buy five newspapers. The unions might have been able to assist an employee ownership program of one newspaper, but Thomson Corp. insisted upon selling all of the papers as a package. I point this out because when we get to the recommendations just a couple of minutes from now, I want to return to that.

I want to address the question of foreign ownership because it's something that's been in the media quite a bit lately. The Toronto Star ran a huge full-page piece by the chairman of Knight-Ridder in the United States saying “Canadians can come and buy our papers, so the reverse should be true. We should be able to buy newspapers in Canada.” The publishers in the U.S. have been lobbying quite hard for a change in the Income Tax Act—the Income Tax Act, as you know, kind of makes it unrealistic for foreign publishers to buy Canadian papers.

The fact of the matter is that the most critical issue in the Canadian news media today is the issue of monopoly ownership and its impact on news, on quality journalism, and on the Canadian public. Opening up the industry to foreign ownership is not an answer to this dilemma. Exchanging a Canadian-owned chain for an American one does nothing to improve the situation but could put the cultural fabric of Canada, which I think we all recognize is already under siege, further at risk. The fact of the matter is that while Canadians such as Conrad Black may indeed own some U.S. newspapers, it's a drop in the bucket compared with the percentage of the Canadian newspaper industry that U.S. media giants like Gannett or Knight-Ridder would own if they bought, for example, the Hollinger properties that are now up for sale.

Protecting the newspaper industry from foreign ownership is not a new or radical idea. In fact, it's standard legislation in most European countries, just as is legislation that prevents monopolies in the newspaper industry.

The fact that too many Canadian newspapers are in too few hands does not mean there's a lack of interested buyers. It simply means that big, wealthy, and powerful chains have muscled their way into ownership and influence. This did not happen because no one was interested in owning profitable newspapers. It occurred because there was no effective legislation to prevent it. A family-owned paper such as the Kingston Whig-Standard is now a shell of its former self. It was an award-winning paper and the first Canadian paper to send a journalist to cover the war in Afghanistan. Families like the Davis family in Kingston and the Burgoyne family in St. Catherines and the Mott family in Kitchener found they could not compete with the economies of scale of the big chains, or else they were offered a buyout price they couldn't refuse.

We believe the answer to Canada's newspaper ownership dilemma is not to put the newspapers in foreign hands. It is to break up the monopolies.

Finally, I want for a moment to mention—and I haven't spent very much time on this—the beginnings of cross-ownership in the media that we're now beginning to see. This isn't the newspaper situation, but we've seen BCE buy up CTV, making it the first time a service provider has bought complete control of a content provider. This is new, and it's a potentially scary and dangerous development.

Izzy Asper of CanWest Global Communications Inc., which is currently in the process of buying up the television interests with Western, has expressed an interest in buying the Winnipeg Free Press. That would create further consolidation in the local Winnipeg market, and it raises all kinds of questions about what cross-ownership would mean. The implication of such further monopolization in terms of cross-ownership should be well understood before it is permitted to occur.

• 1055

This brings me, I think almost within the time limit, to the recommendations. We're putting forward four. I think my colleagues may have some other suggestions as well.

The first one is that when considering whether a proposed merger in the newspaper industry prevents or lessens competition, the Competition Bureau should consider the public interest as well as commercial interests. I know this would be an unusual departure. It would mean considering the impact on the diversity of sources of news and information available to the Canadian public from these newspapers.

The second recommendation we're making—again, it's a departure but one under the current climate that we think would be an important departure—is that when considering whether a proposed merger in the newspaper industry prevents or lessens competition, the Competition Bureau should, in the interest of a free and fair press, consider the impact on jobs and newsroom resources.

The third recommendation is that in order to ensure that newspapers are affordable to interests other than the large conglomerates and to open up ownership to other than the large chains, the Competition Bureau should consider requiring the vendor to offer the newspapers for sale on an individual rather than a group basis.

We have a unique opportunity right now to deal with a monopoly situation in the newspaper industry without saying to any given company, “We require you to sell some of your assets.”

There are five Thomson papers and a number of Hollinger papers up for sale. These are profitable newspapers. The entire industry, except for perhaps the National Post, which is losing money, is profitable. Newspapers typically make profits in the double digits. I know, as a reporter at itThe Globe and Mail, that its profit target was a return on revenue—not on investment—of between 11% and 14%, and that was low in the industry because it reflected a very competitive market in Toronto.

Newspapers are profitable. These are not businesses that people don't want. But when the chains buy them up and buy huge properties at a time and then want to sell them—as you know, we're selling all of the Hollingers to one buyer—we continue the chain mentality and we cut out perspective buyers who cannot afford to buy on the massive level of the big newspaper chains.

Finally—and I think this is an important recommendation because the issue of corporate concentration in the news media is not limited to newspapers—we're seeing the same consolidation taking place in the broadcasting industry with the same all too predictable results. And because cross-ownership issues are now arising, the Standing Committee on Industry should recommend that the heritage committee conduct a sweeping, comprehensive review of media ownership. That review should start soon, while we have papers up for sale and have an opportunity to deal with the issue.

Thank you.

The Chair: Thank you very much.

I'm moving to questions now, if that's okay with your group, because we're going to have some funny votes this morning. I have a bad feeling we're going to have some problems.

Mr. Penson, please.

Mr. Charlie Penson: Thank you to the group before us this morning.

On the question of newspapers that you've concentrated on pretty much in your presentation, Ms. Lem, it occurs to me that Canadians get their news and their information from a lot of sources, newspapers being one important one for sure. But they also get it from television, radio, community newspapers, weekly newspapers, and so on. I'm just wondering about concentrating on the newspaper aspect of this, because my understanding is that Canadians are more and more moving away from newspapers as their source of information, especially with the convergence that's happening with the Internet and television and all of that.

• 1100

So that's the first thing. Should we be so concerned about lack of competition in that industry when it's not the only source?

The other thing is there have been a lot of Canadians who have been subject to having the CBC as their only source of information on television for many years, in rural areas especially. Would that same thing apply to CBC as a monopoly?

Ms. Gail Lem: I'm glad you've asked those questions, and I'm sure my colleagues—or some of them anyway—will want to respond as well. I'd like to first say that it's true the newspaper industry should not be looked at in isolation from the other sources of media, and that's one of the reasons we've suggested in our brief that the heritage committee—which I guess is responsible ultimately—should conduct a more comprehensive review of what's actually happening in the media.

But first I have a couple of comments. The Internet is not really a source of news. It's a source of news insofar as you can get The Globe and Mail online or you can access CBC online, but there aren't really new sources of information on the Internet. There are new sources of data, but it is reporters and journalists who put that data in a usable form to the public. If you have many hours in the day, you can surf the Internet and you can find out all kinds of things—which may or may not be accurate.

Mr. Charlie Penson: But isn't that the same as newspapers? Aren't reporters doing the same thing in newspapers?

Ms. Gail Lem: Reporters are providing a filter. What you do as a journalist, really, is you filter data and you try to decide... You have a responsibility to your reading public, and this is something I think most journalists take very seriously. It's one of the reasons we have a strike at the Calgary Herald. Sometimes, very often—most of the time perhaps—the seriousness with which journalists take their jobs is not shared by the publishers or the newspaper owners. But they have a job of basically filtering the news and providing you with a picture, looking at its importance and hopefully providing you with balance.

I always used to say when I worked as a journalist that there was this myth of objectivity we were taught in journalism school that we were supposed to live up to, but it really was a myth. Really, what's required of journalists is to provide a balanced story—let all sides of the story speak—and present that to the reader.

When you're reading something on somebody's website on the Internet, you're getting raw data, and you do all of that if you want. But I think—

Mr. Charlie Penson: Some people might prefer that.

Ms. Gail Lem: Some people might prefer that, but most of us—and I can certainly speak for myself—don't have hours and hours in the day to comb through all kinds of data. I turn to what I consider to be the more trusted sources—for me at least—of news and information. And most of us do that, because those of us who are employed, at least, spend eight hours or more a day at our jobs and don't have time to do that.

So really, the Internet... It's a myth in a lot of ways, because it provides either the same sources of news, as I said, as The Globe and Mail or the Ottawa Citizen online, or it has all of this other data that you have to wend your way through by yourself.

On the issue—and I'm going to try to be brief—of broadcast journalism, I want to give you an example from Atlantic Canada.

CTV is the biggest private network in the country, right? CTV does not have... outside of the city of Halifax, there is one ENG—electronic news gathering—cameraman left in the Atlantic provinces. I made a reference to consolidation in the broadcasting industry, and I said we see the same all too predictable results as we've seen in the newspaper industry, particularly consolidation in the major centres.

I just came from the heritage committee hearing listening to Mr. Rabinovitch, the president of the CBC, talk about a plan for the CBC that would basically involve gutting all of its regional news services. I don't think people want the Toronto Broadcasting Corporation. But if you analyse what you see too often on the news outside the major centres of this country, that's what you see. You see newsroom resources, whether newspapers or broadcast, pulled out of those—

• 1105

Mr. Charlie Penson: Consolidated.

Ms. Gail Lem: They're consolidated and centralized in the major cities. That doesn't serve Canadians well across the country.

Mr. Charlie Penson: I have a question in regard to your first recommendation, where you say the Competition Bureau should consider the public interest, as well as commercial interest, when it comes to mergers.

I thought that was what the Competition Bureau did. They don't protect competitors, but they protect competition. That's their mandate. That's what they've told us over and over again, as well as a lot of witnesses. Wouldn't that suggest they're protecting public interest, in that they are protecting consumers, if you like, to ensure there's competition?

Ms. Gail Lem: Well, let me give you an example. A couple of years ago, after Hollinger bought out the small Thomson chain that was up for sale, the small dailies, in the last round, the Council of Canadians challenged in the Supreme Court of Canada the Competition Bureau on this. The ruling from the Competition Bureau was that there was no lack of a vehicle for advertisers in which to advertise; therefore, the Competition Act was not breached. But the issue of newspapers isn't just advertisers. It's readers, consumers of the product, not just consumers of the advertising in that product.

That is what the Competition Act does not deal with, the public interest. I'm starting from the premise that the media is not a product like any other. Its product impacts, has an influence on, social, public, economic, and political policy. It's not just widgets.

Mr. Charlie Penson: I see where you're going. Okay.

The Chair: Thank you.

Mr. McTeague, please.

Mr. Dan McTeague: Thank you for being here today. I want to follow up on what Mr. Penson has been suggesting with respect to mergers.

I think it's a very interesting point you made at the end. I note a lot of the merger enforcement guidelines and the court decisions afterward did involve, quite extensively, companies like Southam, and in particular was the case of 1992, which I've just looked at now, where the concern was really of a commercial nature with respect to advertising. So I hear your point.

I want to go one step further with respect to the question of public interest. While the mandate of the act is to ensure the public interest, I think it's done through commercial means. The difficulty, I find, with the question of mergers is trying to find a product substitution, and of course dealing with the whole idea of the relevant market.

When I pick up a coffee, as I did this morning in Pickering, right in front there are four or five stands: a red one, a golden one, a blue one, and of course a grey one, which you may be more familiar with than I. To the person on the street, there would appear to be, at first glance, plenty of competition. That has to be transposed over the various other forms of communication and how I receive my information, through broadcast radio, television, and now of course through the net.

Do you not find it would be difficult... I mean, I understand the concern, and I've been rather interested to note that, as in many industries in Canada, unlike other jurisdictions—perhaps the United States is an example—how one of the major conglomerates will pick an issue and the rest will simply run with it. There's a lot slavishness in terms of the way things are reported. So a lot of the local stuff does not get reported.

How do you see these recommendations in some way facilitating the job of the Competition Bureau to reconcile commercial interests versus the cultural interest—which I think you're referring to—more importantly?

Ms. Gail Lem: I know Mike wanted to respond.

The Chair: Sure, that's fine.

Mr. Mike Bocking (President, Local 2000, Communications, Energy and Paperworkers Union of Canada): On your first point about what the average person in the street would see when they look at those boxes, I come from Vancouver and I know exactly what you're saying. If I look at the street corner where my office is, there's a blue box for The Province, a yellow box for The Vancouver Sun, an orangey-yellow or brown box for the National Post, and then there's a grey box somewhere else for The Globe and Mail.

The first three are owned by Hollinger. So yes, the citizen would see that there are three newspapers from which to choose, but they're all owned by the same company. The other thing too is that they have of course differentiated the product to cover as much of the market as possible, but also to keep out competition. For example, the Province is a tabloid, because if they didn't have a tabloid, then the Sun Media Corporation or somebody like that would come in and do that. So it has been set up to keep people out or to keep other competitors out.

• 1110

I also want to go back to the question that was raised by your colleague at the very beginning, because I think it's related to this cross-ownership issue. In Vancouver, the horse, if you will, has already left the barn. Every newspaper in Vancouver is owned by one person: Conrad Black. If there is competition, it is only provided by the other media, such as the CBC, CTV, the radio stations, and perhaps the Internet in some ways.

What we're seeing now, what we're just starting to see with some big mergers such as AOL and Time Warner and so on, is that we could be seeing a lot more cross-ownership. Even with the little competition we do have left in Vancouver, you could see BCE buying up CTV and then maybe adding these Hollinger papers that are for sale or the Thomson papers.

It's not inconceivable that we could have a worse situation than we have right now in Vancouver, where not only the newspapers but also other media such as TV, radio stations, and so forth might be owned by one large corporation. Perhaps that would be BCE; perhaps it would be one of the new big players in the Internet game. The Internet service providers are looking for ways to add content. One way to do that is to buy up a chain or buy up a couple of chains.

Mr. Dan McTeague: If they can.

I was interested in that, because we've noticed, certainly on this side, that with initiatives that we've taken in areas like gasoline, areas that deal with competition, there are two or three papers reporting it and one conspicuously not reporting it but attacking it in their own editorials. I don't need to elaborate which paper that would be. It kind of creates and paints a very scary scenario for down the road if we have uniformity not just in terms of who is providing the information but uniformity of thought. It tends to have quite a broad impact beyond simple public interest and into the area of public policy.

Have any of you here today encountered circumstances where an owner of a small paper, for instance, has found that their competitor, who also happens to be the supplier of their pulp and newsprint, is also in the business of publishing and is publishing at a cost or selling to retail or selling to everyone through the little boxes at prices that are even lower than the cost of acquisition of the very pulp and paper they use to print?

Ms. Gail Lem: We haven't found that kind of cross-ownership yet, where the actual producer of the raw material is entering the market. What we have found, however—

A voice: Irving.

Ms. Gail Lem: Quebecor and Irving. I'll let you talk to that then.

Mr. Alan Tate (International Representative, Graphic Communications International Union): Thank you. I just have a quick comment on that, if I understand your question correctly.

Although I believe Quebecor has now sold off Donohue Inc., Quebecor had a large ownership in Donohue Inc. Thomson Newspapers also owned large paper mills in Georgia. I remember having a discussion with Thomson at the time. They clearly were getting competitive prices since they owned the paper mills as well.

I hope that answers your question.

Mr. Dan McTeague: Thank you. Irving owns—

The Chair: Thank you, Mr. McTeague.

[Translation]

Mr. Dubé.

Mr. Antoine Dubé: Personally, I can see that the situation is a special one for the media. I would include television and radio, even though this morning, you spoke mainly of newspapers. I wonder whether the question of ownership or the Competition Act is necessarily the only or the best tool.

For example, there are things I am wondering about. I am less aware of current issues as reported in English-language newspapers, but I have noted that a pattern is beginning to develop. That is to say a journalist from Quebec in a Toronto newspaper or vice-versa, whether translated or not. Press agencies send a journalist to cover certain areas. The Canadian Press, for example. The media ask whether the Canadian Press is present, and there is only one reporter. In Quebec, this happens a great deal. I have seen similar cases. At Radio-Nord in Abitibi in Quebec a single journalist covers an event in a city and the three television stations, although they use different news readers, base the content on the work of a single journalist.

• 1115

You are from the union field. I have noticed that you are working together increasingly. I do not want to complain about a lack of union competition, but it seems to me that there are other statutes. Perhaps we could act through the CRTC. I am trying to see how a specific case could be presented to the media. Usually, in statutes, certain exceptions are made for specific areas, but here, it is not a matter of arranging for an exemption for you. On the contrary, you would like more protection than is given to other fields. Have you thought about this aspect? How could this be included in a statute in the name of the public interest? In the Competition Act, it is an exception: it is the opposite of an exemption, but it is unusual. It needs to be more strict. So, I have certainly read your recommendations, but have you thought about the means?

[English]

Ms. Gail Lem: That's a good question. I think I did say at the outset that the Competition Act may not be the best vehicle to regulate this.

I brought another document, but I don't have it for distribution. If you look at countries in Europe, for example, there is newspaper ownership legislation that's not actually part of what might be their version of the Competition Act. It deals with ownership and market share and so on. Some countries, such as Sweden, for example, have legislation that financially assists efforts to start smaller community papers and that sort of thing.

When you look at this rise of cross-ownership that we're seeing, it might make sense to have a body such as the CRTC deal with issues for both the broadcasters and the newspaper industry. That's something that may make some sense. I think we would really want to see somewhat of a substantial change in how the CRTC deals with some of these issues so that the process of licensing and so on would allow for public consultation, which we don't see at all now in the newspaper industry.

[Translation]

The Chair: Thank you, Mr. Dubé.

[English]

Madam Jennings, please.

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

Thank you very much for your presentation. I want to discuss or exchange with you a little bit about the issue of your recommendation that the Competition Bureau should consider the public interest in terms of ensuring that there's a diversity of sources.

I do agree that we need to have a diversity of sources in our media, whether that be the television, the radio, the print media. I think it's really important for democracy that there is a possibility to air broad-based ideas where you can have a difference of opinion. We normally don't have any one opinion across Canada.

I am concerned with the concentration we see in the print media. I'm not as aware of that concentration and the impact in terms of television, although I have to say that when I look at the news it seems like it's the same stories being covered by everyone. The issue of the CBC reducing the local production of news is of real concern to me.

I don't, however, think the competition director is in fact the right vehicle for the issue of public interest, because when we're talking about public interest we're talking about more than just diversity. We're also talking about protecting cultural identity, national identity. In the same way that we've set up the CRTC, that might be a solution or something that at least merits further study.

Do you have anything more than that? The Competition Bureau, as far as I'm concerned, is not the place to be looking at the issue of diversity of news sources in the sense of diversity of interest, because that's what we're talking about, ensuring that the diversity of interests that exists within Canada is properly shown within our print media, which I don't think is the case right now. I really don't.

• 1120

When I read the National Post and the Montreal Gazette, there's no difference. Then when I look at the Quorum—I don't know if you are aware of Quorum, but it's produced here and it's a clipping service of all the major newspapers, national and regional, across Canada that is provided to parliamentarians—literally you'll find four different articles from the Calgary Sun, from two other regional newspapers, and one of the national newspapers, which are exactly the same article. As you mentioned in your brief, the name has changed, but in fact it's exactly the same article. I see that with the Southam newspapers, for instance.

I'd be interested in hearing a little more of your views as to how to ensure public interest through the diversity of ideas and culture, through the print media, without using the Competition Bureau.

The Chair: Madam Jennings, if I could just piggyback on that while they're giving it some thought, one of the examples, and it follows on her question, is how we treated the bank mergers. The Competition Bureau did an analysis and a study. The decision then went back and rested with the Minister of Finance. It was not a final decision where he could then take into account the public interest that you're proposing. I just throw that out there for your comments as well.

Ms. Marlene Jennings: As a possible solution.

The Chair: Yes.

[Translation]

Ms. Marlene Jennings: Yes.

[English]

Mr. André Foucault (National Representative, Graphic Communications International Union): It would be a very good start, I think, for this standing committee to ring this issue broadly and recognize itself that its mandate on this particular issue is too narrow for it to do a proper job in protecting all the aspects involved in this subject.

One can look at what drives the media generally in Canada. There's a profit motive and there is a mission motive. I would say that the pendulum at this point has swung more towards the profit motive, to some degree, and, I won't generalize, but especially in the larger chains, at the expense of the mission. There's revenue in the sale of the product and there's revenue in the sale of advertising. Advertising has become a greater and greater component of the revenue equation. If left to its own devices, it could not perhaps transgress the expectations of this particular perspective but transgress those of other perspectives.

To make reference to the conflict in Calgary at this time, this is exactly what our members and those of the Graphic Communications International Union are about. It might be interesting to see what could be done here with respect to the Canada Labour Code. Right now we have a national Charter of Rights, we have a national perspective, yet those who work in this industry are regulated on the labour front provincially.

We could also look at perhaps providing some mechanisms—and I'm speaking in challenging terms perhaps more than in definitive ones—but there's the idea perhaps of some kind of labour-sponsored fund that could be created to allow start-up and protect those who are out there.

I agree with you that fundamentally the media and information we have as citizens, and more as we develop, becomes the cornerstone of what we stand for culturally, democratically, politically, and everything else. If we aren't mindful and vigilant about this, it could easily slip away—if we just look at it as a business or just look at it from a competitive standpoint.

So I would welcome any statements by this committee that there should be a far broader scrutiny, from different perspectives, of what's going on.

[Translation]

Ms. Marlene Jennings: Mr. Foucault, I have another question. In my district, there are three community papers, two of which are owned by G.T.C. Transcontinental Group Ltd.

• 1125

I live outside of my district and therefore have access to another local newspaper. I must admit that from this standpoint, although two of the four local newspapers to which I have access are owned by G.T.C. Transcontinental Group Ltd., their content is truly varied, because they are local newspapers and the communities in question do not have the same interests, the same activities or even the same concerns. So it is truly diversified.

The content of the Messager de Lachine is rather different from the content of the Monitor in NDG. Interligne is a bilingual independent newspaper which has also created its own niche in Notre-Dame-de-Grâce, Côte-des-Neiges and Côte-Saint-Luc, and it is genuinely different. The Rosemont weekly paper and the weekly in Saint-Michel, are also different in their own way.

I have the impression that because these are local newspapers, even though there is a monopoly, it has not played against the local interest. It is when one speaks of a monopoly beyond the framework of a given community that there is a danger of decreasing the diversity of sources and content.

Do you think it is reasonable to draw such a conclusion?

Mr. André Foucault: For the time being, it is perhaps appropriate to do so in a given district or region, but we are nevertheless vulnerable to changes that might occur over a very short period of time, for example when the head office suddenly imposes a single editorial policy on important national issues, even though they have a local flavour. It is not easy.

Ms. Marlene Jennings: They decide that they don't like the Liberals or they don't like the Bloc Québécois...

Mr. André Foucault: Ah!

Ms. Marlene Jennings: Is this what you are speaking about when you speak of an editorial policy?

Mr. André Foucault: That is an example. Or again, they like Tom Long. It all depends...

Ms. Marlene Jennings: Yes. All the national newspapers seem to like Tom Long these days. Every article seems to be about him and Stockwell Day. So according to you, there may be an editorial policy that says...

Mr. André Foucault: Indeed.

Ms. Marlene Jennings: I am asking you the question because everything that is said around this table is transcribed. It is a public session. It will be in black and white. Words fly away, but print remains. In two years or two months, if Mr. Conrad Black were to appear here, we would be able to show him what was said here.

The question may strike you as somewhat silly...

Mr. André Foucault: No, not at all.

Ms. Marlene Jennings: ...but that is why I am asking it. We will be able to say that certain witnesses came to testify here and said—it will there in black and white—that there are editorial policies and that these polices can dictate support for certain candidates or certain parties. Even if a party has good policies on a particular issue, because someone doesn't like separatists, for example, they will never be given positive coverage. If you don't like the Liberals, they will be never given favourable coverage.

Mr. Antoine Dubé: Or you will never hear about them.

Ms. Marlene Jennings: Precisely, or you will never hear about them.

[English]

Ms. Gail Lem: We both want to respond. Go ahead.

Mr. Mike Bocking: On your question about local newspapers and coverage, there was a very interesting example about 15 or 18 months ago in British Columbia. Apart from Conrad Black, who owns all of the dailies through either Hollinger or Horizons publications, there's a string of community newspapers owned by another fellow by the name of David Black, who is not related to Conrad Black. During the agreement on the Nisga'a treaty between the federal and provincial governments and the Nisga'a people, the owner of that chain, David Black, said that there would only be material in his newspapers that was critical of the treaty. He had to back down on that, which he did, and reluctantly agreed that he would have to agree to interview people such as Chief Joe Gosnell and other important actors, not to mention the New Democratic Party government in Victoria and of course the government here in Ottawa, which is also a party to the agreement. But the fact that he would even countenance the view that he could do it that arbitrarily, and later have to resort to more subtle methods by basically commissioning a series of columns by someone who shared his political viewpoint, is an example of the problem you get when you have a very few people controlling the industry.

• 1130

The Chair: Ms. Lem, do you wish to comment?

Ms. Gail Lem: Speaking as a journalist—and I do work full-time for the union, although I'm on leave from the Globe and Mail. But speaking as a journalist, the National Post created the Tom Long story. They spun that and put it on the front pages, and they created momentum so that other newspapers had to follow it. I am certain that within the next year or so you will see studies, books, and content analysis by academics that will show how that story was created by a major... well, a paper that's distributed everywhere anyway, even if it is losing $1 million to $2 million a week—nobody buys it; it's free everywhere.

That story was a very created story. You have seen more column inches on the Tom Long candidacy than you've seen on the whole thing with Chrétien and the leadership questions around that.

The Chair: I think this topic's very interesting, but we are straying, and we're talking about content, which is not the question we've—

Ms. Marlene Jennings: I'm finished. I achieved my objectives. Thank you.

The Chair: Thank you, Madam Jennings, but we're not supposed to be straying here.

I wanted to return to the earlier question, and maybe you can answer that for us today, which dealt with your first recommendation. I look at it and I see problems, as members of Parliament, putting forward the idea behind the way we looked at the bank mergers and the way it went from the Competition Act back to the Minister of Finance. I think that creates another problem, because perhaps there is a conflict there to have something come back to the Minister of Heritage, when in fact these are the same bodies that then go out and report on us.

Maybe you can't answer that today, or maybe you want to take it back and take a look at it, but when we look at the Competition Act and look at your recommendations, you're proposing to spin the Competition Act upside down. I'm not sure the goal of this committee is to completely turn it upside down but to try to find ways to deal with provisions. Maybe that will be part of the recommendations in the end, but we're trying to look at how we fix it, where are the problems. You're proposing a radical, upside-down turn here and I'm trying to find out whether that is the only solution or there are other solutions that may be out there.

Mr. Bocking.

Mr. Mike Bocking: Even within the Competition Act as it exists now, or should have existed 20 years ago... If you look at 20 years ago in British Columbia, there were at least four or five newspaper companies then. I think it depends on how you apply the act, whether you apply it really narrowly, or if you find reasons not to apply it.

I think it could have been applied in some of the situations we had to deal with in B.C. 15 or so years ago. Twenty years ago there were four companies: FP Publications, Southam, the Sterling chain, and Thomson. And there were still a few independent family newspapers around there. However, because under the act you examine market quite narrowly, in other words it being say just Kamloops or just Kelowna or just Vancouver as opposed to the province as a whole, because you look at just that as a market instead of perhaps all of British Columbia, it has allowed these companies to buy each other out without basically triggering the mechanisms under the act. I think if you had looked at what the market is a little bit more broadly, you might have been able to prevent some of the stuff that has gone on in the last 20 years.

Looking to the future, especially when you're talking about broadcasts and newspapers and so on, I would say that again you want to do the same thing. Look at B.C. as a market in and of itself, not just the little cities that make it up. One of the reasons why I think you can do that, and why it's important, is that many advertisers, for example, if you're looking for that as an avenue, do buys across quite a number of TV stations, newspapers, and so on. If they are restricted from being able to deal with four chains as opposed to one chain, competition will be reduced. Competition is reduced in B.C. because of the fact that there once were four companies in the newspaper industry in B.C. and now there's one, or two if you also include the David Black chain of community newspapers. I think we're going to see that now with cross-ownership, with broadcasting companies buying newspaper companies or vice versa or Internet companies buying both of them. I think you should be looking at the act broadly as opposed to narrowly.

• 1135

The Chair: Maybe that's something the committee can take a further look at.

I think what you're saying is that the way the Competition Bureau has been applying the issue of concentration, they've been dealing on... For example, in Windsor, which is the community I live in, the Windsor Star is still there. It doesn't affect the community, not looking at the fact that more broadly the Windsor Star now is subject to a larger market. It's not just Windsor and Essex county that deals with the Windsor Star.

There seems to be a lot of talk about the future and where media is going. We talked briefly with Mr. Penson about the Internet and access to information. I see a difficulty in people sitting around the kitchen table passing around their computer to look at the different newspaper sections that are on there. I still believe that newsprint is going to stay for a while.

Is there a way to make suggestions that would allow media to expand through e-commerce and yet deal with it as it exists in print, or are we just too close to an evolution that we really can't address it?

Mr. Mike Bocking: We haven't really thought this through, but I think the committee and the government should look at the idea of coming up with some incentives or means to encourage local ownership. We do believe media properties are different from other businesses and that there is a public interest as opposed to just the financial and competitive interests. I know that's the specific concern you have. It could be done perhaps through various tax incentives or others that would encourage local ownership as opposed to chain-wide ownership. Right now there is an incentive for advertisers to advertise in newspapers that are owned by Canadians. There is a 25% advantage to advertisers to do that, as opposed to if it was owned by a U.S. or other foreign company. Perhaps there is something that could be looked at in terms of the same kind of idea but one that would encourage it on a more local or provincial basis. I don't know if that's a federal kind of mandate, probably not, but that might be one idea. I have to admit that I haven't really put my mind to it too much at this point.

The Chair: Okay. Ms. Lem.

Ms. Gail Lem: Perhaps I could just speak briefly to the issue of legislation, because I don't know if I can direct my comments specifically to the Competition Act. Perhaps the members of Parliament could look at some of the legislation that has been enacted in Europe. When you look at European countries vis-à-vis each other, my colleagues in the Austrian Broadcasting Union tell me they kind of view themselves the same way Canadians view ourselves vis-à-vis the United States, because they speak German and Germany is next door and has a bigger economy and all of that.

In Europe you find that there has been a lot of attention paid to legislation. I have with me a document, and unfortunately I didn't bring a translated version because I brought this simply as some background for myself, but I could leave it with you. We're part of a coalition called the Campaign for Press and Broadcasting Freedom, and I understand you're hearing from them later on today. This is the coalition that is beyond unions. There are all kinds of other organizations involved. I have a document from them. I don't know if they're planning to bring it.

They've listed here some of the kinds of legislation that exist in Europe. I mentioned earlier the press subsidy scheme in Sweden whereby newspapers that are not supported by corporate advertisers are provided with some public financing. The French government, for example, restricts any group or individual from owning more than 30% of the daily press and then puts further limits on how much of the broadcast media it might own.

• 1140

In some areas there are also ideas about diversity and journalistic integrity issues. One idea that comes up quite often is that instead of just the management of the newspaper, there should be a provision that editorial boards include a representative from among the journalists and a representative from the community so that the newspaper is responsive to needs other than just the management of the newspaper.

We've also found that the self-regulatory press councils, the Canadian Broadcast Standards Council and the press councils, which are supposed to provide the public with some sort of redress, are not very meaningful. The press councils are just councils of people who are nominated from different newspapers.

But you could have a publicly accountable body, which could investigate complaints, report publicly on findings, order redress, and so on. I think there are a lot of ideas out there about what we could do to make the media more accountable and more diversified. Those things don't correctly fall, as you've put it, under the Competition Act.

I think, however, we have to go back to the main point, which is that we need some kind of legislation. Whether it's done under industry or in some other forum or it's a different, revised, rejuvenated CRTC that also deals with newspapers and other media, we need some kind of legislation that will speak to this monopoly ownership that has occurred in the media.

Anyway, I can leave this document with you, if you'd like, which does have some examples.

The Chair: You could leave that copy with the clerk, and he'll ensure that all members of the committee get it.

I don't have any other questioners on my list.

Does anyone from your group have any final comments they'd like to leave with us? Mr. Foucault.

Mr. André Foucault: If I may, very briefly, this is challenging for all of us, I believe. While we have legitimate business interests that are looking to generate revenue for shareholders and companies in administering information services in this country, we also, I think, have to find some mechanism that gives those who do the work more control over their own situation so that there is a check and balance in the system that protects the integrity of what we consume as citizens. Whether it lies in the purview of the Competition Act or somewhere else, I would suggest that this committee could do a great service by bringing that other dimension to the attention of legislators in its report. We are reaching a point, I believe, that will be viewed in the future as having been a turning point in how we inform ourselves and how we are informed. I believe measures must be implemented to be forward-looking in that regard. I just want to make that comment. Thank you.

The Chair: I appreciate that.

We're looking at it from the point of view of the Competition Act and mergers. One of the issues has to do with how it affects industries and whether it ensures that different industries, including the newspaper industry, can continue to survive and grow in Canada. We will definitely take your concerns into consideration as we do our report.

I want to thank you all for being with us today.

Ms. Gail Lem: Thank you very much.

The Chair: I'm very pleased that the votes did not interrupt us after all.

The meeting is now adjourned.