INDU Committee Report

The Committee commended the stated objectives of Bill C-235, but had reservations regarding the means chosen to achieve them, fearing that legitimate procompetitive practices of integrated suppliers could be inadvertently caught. For instance, the Committee’s view was that the ultimate purpose of the bill was to ensure that: (a) manufacturers could not sell to independent retailers at higher prices than to their own affiliates; and (b) integrated manufacturers could not sell at a wholesale level to independent retailers at higher prices than their own retail price. Clearly, the bill was intended to protect independent retailers from perceived threats by the integrated manufacturers who supply them. The unstated assumption was that by protecting independent retailers, the bill would enhance competition and thus protect consumers. However, the Committee disagreed with the approach taken and with this underlying assumption. The Competition Act is crafted to protect the process of competition generally, not competitors or classes of competitors specifically, yet the proposed amendments to the Act in Bill C-235 departed from this fundamental principle and were intended to protect independent retailers.

Accordingly, on April 15, 1999, the Committee reported Bill C-235 with amendments that deleted its clauses and title. At the same time, the Committee decided that an in-depth study of the Competition Act was warranted. The Honourable John Manley, Minister of Industry, then expressed his wish that the Competition Bureau would engage a third party to undertake an independent review of the anticompetitive pricing provisions of the Competition Act and the Bureau’s enforcement record in order to assist the Committee in its deliberations.

J. Anthony VanDuzer and Gilles Paquet, both of the University of Ottawa, conducted the in-depth study of predatory pricing, price discrimination and price maintenance, including their economic motivations and impacts, as well as their legal treatment and enforcement. Their work, entitled Anticompetitive Pricing Practices and the Competition Act: Theory, Law and Practice, was completed and presented to the Committee in October 1999 (see Appendix 1).

Upon receiving this document, the Committee began its hearings on the Competition Act and its enforcement, starting with the Commissioner of Competition, Konrad von Finckenstein, and Professors VanDuzer and Paquet. Furthermore, the Committee’s decision to study competition in the newspaper industry was taken in June 1999, well in advance of the recent announcements by both Hollinger and Thomson of their anticipated newspaper sell-off. While the announcements might appear to have "shifted the ground" in the industry, the Committee is of the view that issues of newspaper concentration will continue to resurface as issues of significant concerns to Canadians. Moreover, as a result of the rapid and widespread development of electronic media in the past decade, the nature of the debate has changed significantly since the 1970s or 1980s. For these reasons, in the context of its study of the Competition Act, the Committee has taken the opportunity to explore the interface between competition law and the newspaper industry. So for a three-week period beginning in May 2000, the Committee embarked on an intensive study of the Competition Act, hearing from as many as 32 experts in the field of competition policy and law, as well as interested stakeholders.

Part of the way through our hearing process, the Competition Bureau engaged the Public Policy Forum, a non-profit, non-partisan organization for improving the quality of government in Canada, to consult the Canadian public widely on changes to the Competition Act and the Competition Tribunal Act as proposed in four Private Members’ bills: Bill C-402, Bill C-438, Bill C-471 and Bill C-472 (see Appendix 2). Two of these bills cover much the same policy ground as this Interim Report, in particular our discussions on slotting allowances or listing fees that some large retailers charge some manufacturers for scarce shelf space. Because the Committee does not want to prejudice the work of the Public Policy Forum, we have decided to defer the testimony received on this issue, as well as testimony on the Private Members’ bills, to our Final Report. We look forward to reviewing the Public Policy Forum’s complementary report later this year. We are confident that it will be of assistance to us in preparing the Committee’s Final Report.