[Recorded by Electronic Apparatus]
Tuesday, May 7, 1996
.1529 
[English]
The Vice-Chairman (Mr. Valeri): It being 3:31 p.m., I'd like to call the meeting to order.
We shall resume consideration of our order of reference dated Thursday, March 7, 1996 relating to the main estimates for the fiscal year ending March 31, 1997. We shall resume consideration of vote 20 under Industry.
.1530
We have before us today from the Competition Bureau Mr. George Addy, director of investigation and research.
Mr. Addy, perhaps you can introduce the other individuals at the table, please.
Mr. George Addy (Director of Investigation and Research, Competition Bureau): Thank you, Mr. Chairman.
With me are Mr. James Bocking of the mergers branch of the bureau; Mr. Don Mercer from the criminal branch of the bureau; Ms Colette Downie, who's part of my staff; and Mr. Donnelly, the technical support today.
The Vice-Chairman (Mr. Valeri): Great. Thank you. Do you have a brief you'd like to present?
Mr. Bodnar (Saskatoon - Dundurn): Excuse me, Mr. Chairman. I have a point of order.
I've discussed with Mr. Solomon, Mr. Leblanc and Mr. Schmidt the matter of questioning the guests after their presentation. They're in agreement that the Bloc will go first with ten minutes, then the Reform Party will have ten minutes and then they'll allow Mr. Solomon to go with ten minutes so he can depart. He has to leave early today. He can ask his questions and then leave.
I don't know if there is any opposition on this side, but I would suggest there is unanimous consent for this.
The Vice-Chairman (Mr. Valeri): Thank you, Mr. Bodnar.
It's in agreement?
Some hon. members: Agreed.
The Vice-Chairman (Mr. Valeri): Thank you.
Mr. Addy, please.
Mr. Addy: Thank you, Mr. Chairman.
I've had an opportunity to review the transcripts of some of your earlier sittings and indeed the ones dealing with the minister's appearance here. I know some issues in relation to gas pricing and media ownership are of interest to the committee.
What I would propose to do, however, so we're all working from the same fundamental base, is start off with an overview of the bureau, my role, the minister's role and the Competition Tribunal's role, so everybody has an understanding of the process and the organization. If that's acceptable,Mr. Chairman, that's how I'd propose to proceed.
The Vice-Chairman (Mr. Valeri): Certainly. Please proceed.
Mr. Addy: Thank you.
First, it's important to understand that the Competition Act is key framework legislation. It's not a regulatory regime; it's framework legislation, something like the Canada Corporations Act or the intellectual property legislation. It applies to all industries and businesses except those that are specifically regulated. To the extent that either a provincial or the federal government exerts its jurisdiction to regulate in specific fashion a particular industry segment, that would supersede the applicability of the framework legislation. So that would take precedence over the Competition Act.
As framework legislation, the Competition Act doesn't specifically regulate prices, production, promotion or other aspects of competition. It identifies anti-competitive conduct and merger transactions that are subject to a regime of investigation and adjudication, either through the criminal process or through the civil law process before the Competition Tribunal.
[Translation]
It is also important to bear in mind the objective of the act, which is to preserve and maintain competition in Canada; but that is not the only goal. The act also aims at stimulating the efficiency and the adaptability of the Canadian economy, at improving Canada's ability to participate in world markets and at recognizing the role of foreign competition in Canada.
The act is also designed to provide small and medium-sized businesses with a reasonable opportunity to participate in the Canadian economy and to ensure that consumers get competitive prices and a choice of products.
[English]
As director of investigation and research, I am responsible for the administration and enforcement of the act. I'm appointed by cabinet and serve as an independent enforcement official, and I'll be getting into this in a bit more detail in a moment with some other slides.
I exercise the powers that Parliament has invested in the director independently; there is limited ministerial oversight. I know that's an issue that's been raised before, and I'll detail that in a moment.
.1535
Primarily the role of the director is three-fold. The director acts as investigator in accumulating information of a criminal nature where there are breaches of the criminal provisions of the act.
I act as investigator. We use formal powers, like search warrants, etc., to build the case. We then refer to the Attorney General with a recommendation for prosecution. In a price-fixing case we'll say that we recommend that charges be laid against A, B and C in relation to a price-fixing scheme on gas prices.
Then the Attorney General takes the summary of evidence, satisfies himself that there is indeed a case and proceeds to lay charges. We then act as part of the prosecution's team. Prior to the referral all the work is contained within the bureau itself.
The second role is that of investigator and applicant. This deals with the civil provisions of the legislation, those that are not criminal, those that end up before the Competition Tribunal for adjudication.
They deal with things like merger reviews or abusive dominance, for example. In those cases I have the basket of powers available to me to develop the case, but instead of referring it to the Attorney General for prosecution I act as plaintiff, as applicant, if you will, before the competition tribunal in seeking an order from them either prohibiting a merger, or, in an abuse case, ordering that certain conduct be changed so the market isn't abused by the dominant respondent.
The third major role of the director is to act as competition advocate. This is done in two ways. Formally, it's done by representations to federal boards, commissions or tribunals, or, with their permission, to provincial boards, commissions or tribunals.
There's a specific provision in the legislation that says the director can intervene as of right, before federal boards and tribunals, which we do frequently, before the CRTC on telecom matters for instance, and with permission before provincial agencies and boards. That's the formal means of acting as competition advocate.
The informal means is providing competition policy advice to the government as policies are evolving. That is of a more informal nature. There's no statutory right to do so. But the government and my colleagues in government recognize the value of the input from the bureau in their policy development. We participate in that capacity.
For instance, when the transportation department is thinking about changes to the National Transportation Act and Agency, and about how to deal with deregulating this sector or that sector, they may come to us to ask for advice as to what I, as the director, see as the competitive implications of one policy alternative versus another. That's our informal advocacy role.
[Translation]
As far as the organization is concerned, we have a staff of about 245 full-time equivalent and a budget of $17.69 million. All our staff is based in Hull.
The Bureau is made up of six branches: Criminal Matters, Civil Matters, Mergers, Marketing Practices, Economics and International Affairs, and finally, Compliance and Operations. More recently, we created an Amendments Unit.
All branches are responsible for compliance and play a role in promotion and public education, through speeches, efforts, information, visits with interested parties and so on. Those activities are not limited to the Compliance Branch.
On a daily basis, we work very closely with the Department of Justice.
[English]
Here is another pictorial diagram of the bureau make-up, Mr. Chairman. The issue there - besides the breakout of the organization - is the roles of the deputy and the minister, which I'll get back to in a moment. Insofar as my enforcement responsibilities are concerned, I act in an independent capacity. For things such as the budgets, personnel, the operations of the office, I report to the deputy minister, and the deputy minister has final authority; ultimately the minister. So there's a bit of a dotted line there from the director's office to the deputy. It doesn't show up because of that bifurcated approach.
.1540
A key component of our work is confidentiality. There is a provision in the act, section 10, which says all inquiries shall be conducted in private. There is not only statutory recognition for the importance of confidentiality. It has also been recognized in the operating policies of the bureau ever since I've known the organization, which is quite a while. It's very important that the ability of the bureau to operate with confidential information and to sustain that confidentiality of the information is key to how we operate, and key to something I think is of value to our Canadian system of antitrust law or competition law, and that's our voluntary compliance approach.
The Canadian system is much less adversarial than the U.S. system. Part of that is a reliance and a confidence we've built up in the private sector with our ability to deal with information in a confidential fashion and keep it confidential.
The next is the enforcement process. I thought it would be useful for you to understand how we go about doing our work.
Information comes to us from a variety of sources. We have complaints. A complainant can come in. They'll come in personally. They'll mail complaints in. They'll telephone complaints in. They'll send their lawyers in with a complaint. We also track the media and the business journals, trade journals, etc., to keep us alert to what may be coming issues, issues we should turn our mind to as possibly raising concerns under the legislation.
If something like that is flagged, we then initiate a preliminary examination. Pardon the jargon here, Mr. Chairman, but it's important to distinguish between preliminary examination and inquiry. That will become apparent in a moment.
The preliminary examination usually consists of interviews. Sometimes the complainant will come in with a whole bunch of material we'll have to analyse. We'll verify it with street contacts, people in the industry. We'll take sworn statements, etc., from potential witnesses or complainants.
Then comes the formal trigger. The statute contains a requirement to trigger a formal inquiry that the director believe on reasonable grounds that a criminal offence has been committed or that an order of the tribunal would issue in relation to some specific conduct. If the director doesn't believe that, then no formal inquiry is triggered and the case is closed, or the preliminary examination may continue, but until the director is satisfied it meets that legal threshold, no formal inquiry is triggered, so there's no access to search warrants, there's no access to subpoenas of documents or information, there's no access to compulsory oral hearings. The formal tools and powers provided for under the legislation don't get triggered unless you meet the formal inquiry threshold.
That is for inquiries I trigger on my own. There are two other ways to trigger a formal inquiry, and they don't call for that threshold. The first is that under section 9 of the act six Canadian residents can file material with the bureau and the director has no discretion; he shall initiate an inquiry in those circumstances. I don't have the statistics with me at the moment. We get probably a half-dozen to a dozen of those a year, triggered in that fashion.
The other way a formal inquiry can get triggered is by ministerial directive. When we canvassed the corporate memory of the organization, even veterans of the bureau such as Mr. Bocking could recall only one instance where a minister formally triggered an inquiry, and that was during the uranium cartel examination some years ago.
So the formal inquiry gets triggered. We then pursue our investigation at a more formal level, having access to these powers. Then we summarize the case.
.1545
If it's a criminal case, we prepare the summary of evidence with recommendations to the Attorney General: here's what we found, here's the offence we think has been committed, here are the people we think committed the offence, we recommend charges along these lines. If the Attorney General agrees with us, we then play that support role.
If it's a civil matter, we prepare an application to the Competition Tribunal and go to it for adjudication. You might have read about the recent filings in the tribunal. Just after Christmas we filed on the Interac case involving the use of the electronic network. We filed a merger challenge involving a company called Seaspan in Vancouver. That's where we'd go for that type of matter.
Alternatively, even at the end of the formal inquiry stage there may be a conclusion while the evidence isn't there. There was enough to get over the initial threshold to trigger the formal process, but on further examination there is not a case there, there's no infraction of the law. In that circumstance the inquiry is discontinued, which is also provided for in the legislation.
That's another spot where the minister plays a role. I report to the minister that I am discontinuing an inquiry, and the minister can say, ``No; would you please examine it further''. That's another limited role, another area where the minister plugs into the process.
That, in a very brief form, is how we go about doing our business.
[Translation]
The next slide explains the types of rulings. For example, let us take the civil law process. We review the conduct in question. If a complaint is filed about abuse of dominant position, we determine whether or not the legal test has been met, in other words if there has been a substantial decrease in competition. We also consider the acceptable defences in that type of conduct under the law, such as higher economic performance. Otherwise, we ask the competition tribunal to issue a remedial order.
[English]
Again, some examples of several cases that are pending: Télé-Direct, which is a case on which we finished the hearings about three weeks ago, involved the tying of art services to the accessibility of space in the Yellow Pages. That's something that would go to the tribunal. On the criminal side, an example is a conspiracy, price-fixing.
[Translation]
This test helps to determine if there has been an unfair reduction in competition. There is a lot of jurisprudence which explains the meaning of this test. The law also prescribes certain defences, all the types of agreements which are more favourable to competition, the exchange of statistics, etc. If there is a criminal action, it is spearheaded by the Attorney General.
[English]
This one again is just a snapshot of who does what.
[Translation]
The Mergers Branch is responsible for everything pertaining to mergers: review of transactions and prenotification filing civil matters, abuse of dominant position, interventions in federal or provincial courts, and intervention at the CRTC.
We also have the Criminal Matters Branch.
As far as the Marketing Practices Branch is concerned, it specializes in misleading advertising and unfair trade practices.
The Compliance and Operations Branch deals with law enforcement, compliance programs, legal research, all our public education program and the publication of our pamphlets and guidelines.
The Economics and International Affairs Branch has two basic components. The economic component supports the analysis of enforcement cases. The second component deals with our international relations. International relations are becoming an ever increasing part of our daily activities, due to the globalization of markets and to the need to cooperate with our foreign counterparts in order to stave off anticompetitive practices aimed at the Canadian market.
.1550
The Amendments Unit was created about 18 months ago to manage the current changes to the act.
[English]
Now, how do we go about reviewing mergers? First, the legal test is a substantial lessening of competition. We have a three-year window in which to operate; we can challenge a transaction at any point within three years of substantial completion of the transaction.
Mergers, in contrast to criminal offences, for instance, are not presumed to be bad. It is assumed that only in exceptional cases will mergers be anti-competitive. They're recognized as a pro-competitive means for a structural adjustment in the marketplace.
The mergers also have a prenotification requirement. That's new; the merger process was introduced in 1986. Prenotification requires large transactions to give us a heads-up ahead of time, before they close. So if you meet the thresholds, if the parties to the transaction have assets or sales in excess of $400 million and the transaction issue is valued at $35 million, they have to prenotify us. Under the act, there's a mandatory waiting period that prohibits them from closing the transaction until that period has expired.
[Translation]
Civil Affairs are still dominant. We have referred several cases of refusal to sell, consignment selling and tied selling to the courts, including those of Laidlaw and A.C. Neilsen.
We also have orders challenged by consent. This can be done because one does not have to challenge before the court. This procedure is frequently used with the consent of interested parties.
[English]
In criminal matters - conspiracy cases, for instance - we recently had the Canada Pipe case last September, in which we got $2.5 million in fines. Two Fridays ago we had the waste case in the Mauricie, where the parties pleaded guilty and were fined $1.95 million.
We deal with bid-rigging cases, in which people rig their bids on public tenders, and we've had some success there as well. We deal with price discrimination, predatory pricing, price maintenance. For instance, we recently had the price maintenance case with Mr. Gas, a prosecution in which a judgment came out in January of this year.
The Vice-Chairman (Mr. Valeri): Mr. Addy, in the interest of time, I wonder if I could ask you to wrap up your presentation. I know there's going to be information that -
Mr. Addy: I'm sorry, Mr. Chairman.
The Vice-Chairman (Mr. Valeri): I'd like to ensure that members have ample opportunity to ask questions. Perhaps you can then draw from your presentation to make the points that are remaining there. So if you can take the time to just....
Mr. Addy: While we're on it, Mr. Chairman, I or my officials are always available to come back at any time, or to meet with members privately, individually. We'd be more than pleased to do so.
I'll try to wrap this up in about five minutes, if that's acceptable, Mr. Chairman.
The Vice-Chairman (Mr. Valeri): Or less.
Mr. Addy: Let me just tell you what we're focusing some of our attention on now, where our bureau priorities are. Of late, it's been on issues dealing with what I call industries in transition: financial markets, telecom, broadcasting, transportation and electricity. We're also dealing with things dealing with new technologies involved in business behaviour; telemarketing; the implications of the information highway, etc.; and international cooperation and the crystallizing of that in bilateral agreements with our counterparts.
I guess I'll leave it there, Mr. Chairman. I have some slides on gas pricing if we get into that. I have some data up here that we can refer to.
The Vice-Chairman (Mr. Valeri): Great. Perhaps we can use them as backup to some of the questions that I'm sure will relate to gas pricing.
Mr. Leblanc.
[Translation]
Mr. Leblanc (Longueuil): Yes, why not. I will probably ask a question on that topic.
.1555
As we know, gas prices have increased by at least 25% in the last few months, and we also know that in the U.S., they increased by about 30%. In the U.S., it has been recognized that there is a possibility of collusion among gas companies, and they have decided to investigate.
Does the Bureau intend to investigate in order to determine if there is collusion among companies? We know very well that most probably, collusion comes from the United States, because most gas companies are American, but the law allows you to investigate when those American companies operate here in Canada. Where do you stand on that issue?
Mr. Addy: We have been following the gas market closely for many years, and we still do. Yesterday, I discussed it with my American counterpart during our half-yearly talks. We have developed measures in order to make the Competition Bureau more easily accessible to people who do have evidence to submit to us. Before launching a formal investigation, the law requires me to be convinced that there has been a criminal offence.
Therefore, we invite all those who think they have information to come and see us. In fact, a 1-800 telephone number is available to those who would like to contact us. We also publish pamphlets for the public at large. We will leave you a few copies today.
We also want to encourage individuals who have information to come and see us. Among other things, one of the objectives of the amendment project is to increase the confidentiality of the information which is sent to us on a voluntary basis.
Are we carrying out a formal investigation on the collusion aspect? The answer is no. But we examine the issue on an ongoing basis, and if we have reason to believe that there could be collusion, we will not hesitate to launch a formal investigation and formal proceedings.
Mr. Leblanc: But don't you have enough indications in view of the fact that the Americans have decided to investigate?
Mr. Addy: There is no proof of collusion. We can only note that prices have increased on the market. You must not forget that an area like the oil market has many unique characteristics. The consumer has the choice between different competitors. When he drives around at 60km an hour, he can see the different prices. They are all posted. I cannot think of another commodity for which you have that kind of choice.
This also means that gas companies immediately know what their competitors are doing. Therefore, it is a very volatile market. And this volatility is beneficial to the consumer.
Mr. Leblanc: I understand. You mean to say that competitors can quickly adjust their prices.
Mr. Addy: That is right.
Mr. Leblanc: Hasn't there been any prior agreement?
Mr. Addy: It is not an offence to follow one's competitors or to react in a competitive way.
Mr. Leblanc: I will stop here and talk about the electronic highway. We know that the electronic highway, which is probably the equivalent of cable television and broadcasting, has developed fairly quickly. We also know that the Canadian market is relatively small compared to the American market.
In order to prevent the development of competing highways offering the same services, have you started examining the possibility for American companies, which have a much bigger market, to monopolize the Canadian market in a certain way?
.1600
Mr. Addy: It is important to remind you that when it comes to mergers, for example, the law states clearly that being a big American company cannot preclude the transaction. Therefore, the fact that a big company is buying a small one is not sufficient to make the big one anti-competitive according to the law.
As far as acquisition is concerned, the Telecommunications Act and the Broadcasting Act impose certain limits on foreign ownership. As a matter of principle, free competition is a good thing, not only in terms of prices, but in terms of the capital and capital stock. Those are competition policies and I admit that there are other considerations which are very legitimate in that kind of decision.
Regarding the nationality of the company which is settling in Canada, the Competition Act is absolutely neutral. Actually, what we examine is the market.
Mr. Leblanc: You said earlier that prevention was part of your mandate, and that you were required to suggest amendments to the act which could in certain cases improve or protect our interests in foreign markets, unless there is already some legislation to that effect, but planning is also part of your mandate.
Mr. Addy: Yes.
Mr. Leblanc: In this new market of the electronic highway, our next door neighbours, the Americans, are definitely stronger. Have you considered amending the act regarding cable television, broadcasting, satellites and so on?
Mr. Addy: It is an area which evolves very rapidly. We have set up a task force on telecommunications. I have presented many submissions to the CRTC on certain issues, including convergence, at the hearings which were held last year, and I also talked about competition. The nationality of the company which offers the services must not be the only concern; you must also think about Canadian companies which buy those services. To make sure that those companies are competitive, it is important that there be competition among service providers.
So it is that kind of balance that I'm trying to bring at the table in all circumstances, whenever we deal with limits to foreign ownership, universality... The CRTC and the government are now reviewing many of those issues.
[English]
The Vice-Chairman (Mr. Valeri): Thank you, Mr. Leblanc.
Mr. Schmidt, please.
Mr. Schmidt (Okanagan Centre): Thank you, Mr. Chairman.
Thank you, Mr. Addy, for coming and bringing your officials with you.
I'm very interested in the process you outlined on the screen. I thought it was very interesting. I'd like to ask you about a civil situation where you actually determine the trigger at which a particular decision is made to prosecute or not, or to apply to the tribunal, in other words. In that event, when you do this kind of evaluation of the evidence or the information that's brought to you, what sorts of criteria do you apply that would constitute sufficient quality or amount of information or evidence to urge you to go to the tribunal?
.1605
Mr. Addy: That would vary from practice to practice. If it's a merger case, we have merger guidelines that set out in voluminous detail how we go about analysing a merger transaction and what would be of concern to us under the legislation and what would not. If it's an abuse case, there's another set of criteria, because the legislation has another test.
So it really varies from practice to practice, and it's the context of the jurisprudence that's developed in relation to that practice and the economic rationale underpinning those practices that will guide us in one case to another as to whether or not we will go to the tribunal.
Mr. Schmidt: If the minister decides that you should proceed but you have decided not to proceed, what happens?
Mr. Addy: He can't do that. All the minister can do is direct me or the director, whoever that might be, to initiate a formal inquiry. He cannot direct what the outcome should be. So he can pull the trigger, if you will, and say, ``I want you to start a formal inquiry on X'', but he can't say, ``And I want the outcome to be Y''. All he can do is trigger the threshold sort of midway down the process chart, and to our knowledge it's been done only once.
For instance, there is the case in gasoline pricing. It's been of concern to me and my predecessors. The gentlemen with me today and I spent a goodly part of five years of our lives before the RTPC on the inquiry into the state of competition in the oil industry. It's something that's near and dear to our hearts. I have discussions with the minister on an ongoing basis and he asks what's going on in the gasoline industry. If he has a concern, he'll pass it on, and I will deal with that issue.
There's no formal requirement for the minister to trigger that inquiry process.
Mr. Schmidt: I asked the question because you made the comment that if an inquiry had started and you decided to stop it, the minister could then direct you and say, ``No. Keep on going.''
Mr. Addy: Yes. ``Keep looking''. He can do that.
Mr. Schmidt: So he can do that, but he can't initiate the inquiry in the first place.
Mr. Addy: No. He can trigger the initiation. He can ask me to keep looking, but he can't tell me what the outcome should be.
Mr. Schmidt: Yes. Exactly.
Can he prevent you from taking it to the tribunal?
Mr. Addy: No.
The only other role that wasn't on that chart is the tabling of the annual report.
Mr. Schmidt: There is a definition of tied selling in the act. In practice, under what kinds of circumstances would you describe something as being tied selling?
I'll give you a specific example. Tell me whether it fits or it doesn't.
A financial institution is in the business of lending money. Another financial institution is in the business of providing advice and assistance to individuals, and perhaps even placing funds in RRSPs. The financial institution says, ``In order for you to be given a loan, you must move your RRSP from your other place to our business where we're going to lend you the money''. What is that?
Mr. Addy: That's a very interesting problem.
Mr. Schmidt: I know it's a very interesting problem - and it's a real problem.
Mr. Addy: Yes. I know.
It's one we've been dealing with. As you may know, we're participating in the financial review that the Department of Finance will be undertaking shortly. That is a very core issue. We've been meeting with individuals and various groups have come in with complaints and we're very interested in any evidence on those complaints.
Unfortunately, to date we've found that there's a lot of talk but no substance. I haven't had somebody come in and say, ``Here's the loan form where my bank manager said, `Sign this and you'll get life insurance' - or something else - `with it''', or however the tying is being made.
It's something we're concerned about. It's something we're looking at, but to date we haven't had a case of that nature.
Mr. Schmidt: That really wasn't my question. My question was, if such a case could be proven, would that qualify as an example of tied selling?
Mr. Jim Bocking (Chief, Division ``B'', Mergers Branch, Competition Bureau): There'd be two questions. Whether or not it would be tied selling is the first basic issue, whether or not you're tying one to the other. Assuming that, then the second major test is that it has to have some sort of exclusionary effect on the market. The exclusionary effect, in your example or the question you are asking, relates to the exclusionary effect it would have on the sale of mutual funds.
.1610
Mr. Schmidt: Precisely.
Mr. Bocking: And the test there was whether that would cause a substantial lessening of competition in the market. Would one bank doing tied selling, one financial institution, cause a substantial lessening of competition, when everyone else, every other financial institution, and everyone else in the marketplace was competing? That would be a determination of the facts of a particular case.
So what you say is not a per se offence. It's a reviewable practice. You would look at the facts to see who has engaged in it, because it has to be engaged in by a major supplier, and what impact it would have on the market in terms of whether it would substantially lessen competition. So I couldn't say without knowing who the parties are.
Mr. Schmidt: That's fair.
Mr. Bocking: That's the sort of consideration and the issues we go through.
Mr. Schmidt: That's fair. The other question has to do with the operation of the tribunal itself when it meets and actually has before it the information that has been gathered by your investigative team and it now arrives at a conclusion. What strength is there in the action the conclusion might require?
Mr. Addy: There is tremendous strength. It is a quasi-judicial tribunal. It's comprised of both Federal Court judges and lay members. A breach of their orders is contempt of court. It's a court order. It's appealable to the Federal Court of Appeal, etc., so it does have the force of law.
The process before the tribunal is quite formal. We're there as plaintiff and we put in our case. The respondents are there. There is cross-examination. It's a court proceeding, essentially.
Mr. Schmidt: So there would be an appeal -
Mr. Addy: Yes.
Mr. Schmidt: - to a decision the tribunal had reached.
Mr. Addy: Yes, to the Federal Court of Appeal, and from there to the Supreme Court of Canada.
The Vice-Chairman (Mr. Valeri): For those members who were not here in the beginning, a suggestion was made to allow Mr. Solomon ten minutes of questioning at this point in the line-up so he can make some other commitments. There was unanimous consent for that, so I go toMr. Solomon for ten minutes.
Mr. Solomon (Regina - Lumsden): Mr. Chair, thank you very much, and I thankMr. Bodnar, Mr. LeBlanc, Mr. Schmidt, and other members for allowing me to do this. I have to catch a plane.
The Vice-Chairman (Mr. Valeri): We do work together.
Mr. Solomon: It's a very cooperative group. I appreciate that.
I have a number of questions, Mr. Addy. I'm not sure where to start, but perhaps we could start with your giving me a couple of quick answers. How do you define competition?
Mr. Addy: How do you define deterrence? There is no absolute definition. Is price dissimilarity competition? Is similarity of prices competition?
Competition is a state of the marketplace where you're getting rivalry, where you're getting innovation, you're getting supply-demand discipline brought to the actions of the people in the marketplace. That's what happens when you have a competitive market.
Mr. Solomon: Do you believe under that definition there is competition in gas pricing from company to company?
Mr. Addy: I think there is no reason to believe there's any breach of the competition law. What you have -
Mr. Solomon: That's not the answer. Do you believe under the competition definition, under your definition, there's competition?
Mr. Addy: As director and as a consumer I'm satisfied there is no basis to believe the prices I'm paying for my gas are anything other than the outcome of a competitive marketplace. So in that context the answer is yes.
Mr. Solomon: About the example my colleague from Quebec brought forward, in the United States we've had an increase of between 5¢ and 7¢ a litre, once you factor out the differential in exchange and size, versus 8¢ to 10¢ a litre in Canada in the last thirty or forty days, across the piece. Provincial differences will exist because of the differentials in taxes, but there are some substantial increases. In Canada this represents an increase of 42% in terms of gross revenues to the oil refiners and oil companies in a very short time. The justifications they have provided publicly don't seem to hold a lot of water.
I'm wondering about that situation. In the States we've seen the President of the United States, Bill Clinton, undertake instructions to his justice department to launch an investigation, plus instructions to his energy department to do something with reserves. They've released 12 million barrels to Japan. What is it they have in the United States that we don't have in Canada that allows this to happen, when there is a much smaller increase and the President can order this? Is there a different instrument, are there different laws, are there different scenarios that have to exist?
.1615
Mr. Addy: I don't understand the question, sir. If you're asking what the difference is, they have a different law. If you're asking whether the outcome is any different, I'd say no. We're examining the market. We do so continuously. If somebody comes forward with evidence, we'll prosecute, and we have. We have a long history of prosecuting the oil companies and gasoline retailers in this country.
We'll act, but we need the evidence. We do have a process here where we have to satisfy certain legal requirements. We can't just go after the oil companies because the price has gone up. We have to see that as an offence.
A whole host of issues has been raised as possibly explaining the increase: the extra long winter, which we've all suffered through here; their depleting inventories; the inability to do turnaround at the refineries because of the long winter; some uncertainty as to whether Iraq is coming back into the crude market or not. There's a whole host of variables at the international level. We're not insulated from the international influence on crude prices, for instance.
At the retail level, there's a whole bunch of issues that will affect it from one jurisdiction to the other, from one market to the other. Do you have a strong presence of non-branded gasoline stations? Are you close to the border, where you can have access to imported products? There's a whole host of local supply and demand issues that one has to factor into the equation.
Mr. Solomon: So you're saying that none of those situations are being questioned in Canada. Everything that's been provided, in terms of information, is acceptable to the Competition Bureau?
Mr. Addy: I'm saying that I have no reason to believe now that there's been an infraction, a breach, of Canadian competition law. We are following the matter.
Mr. Solomon: You've indicated to the committee that you're undertaking to follow the matter, as you just said. Could you just explain that a bit more fully?
Mr. Addy: We've done several initiatives, quite apart from the information gathering sources. We have initiatives under way to try to help educate the public, we've produced and circulated pamphlets, we have a 1-800 number in line, and we've been tracking the complaints since the complaint centre was set up, which was last summer.
As I recall, we've had somewhere in the order of slightly over 200 complaints in relation to gasoline. We track those and try to determine at our preliminary examination stage whether there is an issue here or whether it's just somebody phoning and saying they don't like the price. I can't do anything if somebody phones and says they don't like the price. If they say they were at Tim Horton's and overheard some competitors around the coffee table all agreeing to bump their prices tomorrow, I'd love to hear about that.
Mr. Solomon: So an indication from oil companies that everybody in the region jacks up their price to the same price within hours of each other is not substantive evidence. You'd need something more with it?
Mr. Addy: You have to be careful because identity of prices can be a sign of perfect competition. It's not necessarily a presumption of collusion.
You have a scenario here where the gasoline price is posted on the street. A lot of the signs now are adjusted electronically; they don't even have to climb up ladders any more. You see your competitor's price go up, you phone your dispatcher or the equivalent in the oil business, and they say match them, and it's done in five seconds. So the fact that the prices aren't dissimilar could be a reflection that the market is reacting very rapidly. It can also be a suggestion that there is some collusion, and when we have reason to believe that, we prosecute. That's what we did with Mr. Gas this January.
Mr. Solomon: So when prices go up, everybody jacks up their price and that's okay, but it's not the same when they go down.
Mr. Addy: It's not a question of it being okay or not; it's a question of whether it is being done as a result of market forces. If it's a result of normal market forces, that's fine.
Mr. Solomon: The reason I'm raising this line of questioning, Mr. Chair, is that the oil companies may go on record and give you as many different excuses as they can think of. This is not to do with the Competition Bureau, but just as information. The latest was that the Imperial Oil spokesman indicated from Calgary that the price of crude is higher than it was during the Gulf War. Of course, everyone knows that during the Gulf War the price hit $40 U.S. a barrel, as opposed to $25 last week, and now it's down to $21.
Consumers are rather skeptical of some of the reasons they give. During the Gulf War there was a 90-day inventory lag in terms of prices; this season there was a 90-hour lag. They're wondering why these things are all changing. They're wondering why every single refinery of every single company is doing the same thing. I think this is why they are, in many cases, concerned.
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I think the things that you're doing in terms of publicizing hotlines and 1-800 numbers is very good, and that should continue unabated.
Another question that I wanted to ask you - a final one on this - is more general than it is specific to gas. It pertains to the 1986 changes that were referred to. What powers do you now not have that you had prior to 1986?
Mr. Bocking: George referred earlier to our involvement in the petroleum industry. We appeared against the petroleum industry for three years under a provision of the legislation that was called old number 47. Section 47 dealt with public inquires before the old Restricted Trade Practices Commission, which was a predecessor of the Competition Tribunal of Canada. It permitted the examination of monopolistic practices in a particular industry. George was counsel to the director and I was involved in that over a three-year period. We were examining monopolistic practices in the oil industry. That provision was dropped in 1986 because it was a research/inquiry type of analysis, as opposed to what we have now.
Mr. Solomon: Thank you. I have a question regarding -
Mr. Addy: Mr. Solomon, if I could just add something, my recollection on the time lag issue is that there may have been a tax change on the costing of inventory that made it a LIFO-FIFO type of issue. I'm not an accountant, and I don't want to be one, but I think there was something intervening there that had an impact on the lag.
Mr. Solomon: I have a quick question regarding Hollinger Inc., Mr. Chair.
The Vice-Chairman (Mr. Valeri): One last question, yes.
Mr. Solomon: In the last number of months, we've seen in Canada a consolidation of ownership, a concentration of ownership of the newspaper industry. In Saskatchewan, P.E.I. and Newfoundland, all dailies are now owned fully by Hollinger. I understand the mergers branch has undertaken a quick review of the Saskatchewan situation and has decided there's no problem there.
It's a two-pointed question, Mr. Chair. One pertains to the Saskatchewan situation and the new purchases. Will there be a review of this new purchase, and will it have an effect with respect to what's happened in Saskatchewan?
The second part of that first question is in regard to the predatory pricing. The Yorkton Enterprise - which is owned by Hollinger, by the way - is threatening the weekly newspapers in the rural area around Yorkton, Saskatchewan. What is the status of that?
Finally, the last study on the concentration of ownership was done in 1981. Do you believe we have now seen a concentration of ownership, a reduction in the overall number of owners? Do you think it might be time for another review of a concentration of ownership in the media?
Mr. Addy: I think the last question is best left for you gentlemen to deal with. On the transaction -
Mr. Solomon: Your advice and opinion is well known.
Mr. Addy: What I can tell you is that I don't think the Competition Act is the right tool by which to try to deal with things of a more socio-political nature, like concentration in editorial content. Our focus in the merger examinations.... I don't know if you're aware that there were some more acquisitions announced this morning by Hollinger.
An hon. member: I didn't hear that.
Mr. Addy: Neither did I until I got a call from the media.
An hon. member: What were the purchases?
Mr. Addy: There are some papers in Ontario - Sarnia and other communities -
Mr. Bocking: Seven papers.
Mr. Addy: There was a hint yesterday that it might be coming down the pipe. Apparently it came out this morning.
Getting back to your question, I don't think the Competition Act is the right place to do it. Indeed, that was the conclusion of the Kent commission as well. This is something that is not really a competitive market issue. It's more of a socio-political issue that should be dealt with elsewhere. When we look at this transaction, we look at the fact that Hollinger is coming in and is substituting for the previous owner in a market they were not in before. It is competitively neutral insofar as how that paper operates in the market.
We have challenged newspaper acquisitions, as you may be aware. We've challenged Southam, Thomson, and Irving, and we have an ongoing challenge with Southam before the courts now, at the Supreme Court of Canada. But the approach there has been from the competitive marketplace.
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As an example to illustrate how we go about doing the analysis, the recent one was where Southam owned the two dailies in the lower mainland of B.C. and the Vancouver area and then bought up all the weeklies. We said, no, there's a problem here because the market for print advertising is now all controlled by one entity. For commerce and businesses and people trying to place print advertising, which we defined as a discrete market, the competition in that market would be lessened substantially. That's how we'd go about it.
The Vice-Chairman (Mr. Valeri): Mr. Lastewka.
Mr. Lastewka (St. Catharines): Over the last number of months we've had a lot of discussion concerning the banks and insurance and the banks and auto leasing. If you stand back and look at the auto leasing situation, and look at it as a dealership and the automotive industry on auto leasing, versus the banks trying to get into auto leasing, it could be construed that the OEMs and the dealers were doing a kind of monopoly and not allowing someone else to come in and compete. Could you give us your opinion on that?
Mr. Addy: Let's take a step back again from the market dynamics perspective. From the consumer's point of view, the more opportunities or alternatives there are for the consumer to secure leasing, the better.
What we get concerned about in the legislation is if there is a dominance, for instance, or an agreement amongst all the people involved in leasing, or if one group becomes dominant and is able to abuse that dominance by compelling exclusivity agreements or that sort of thing. That's how we'd scope the problem.
It's not a question of whether the banks should be in this business or whether it should be left to the auto manufacturers. It's a question of what the market implications are for one alternative and the other. From a pure competition policy perspective, the more opportunities and the more players in the field, the better, as long as they don't abuse their position.
Mr. Lastewka: You also mentioned earlier that you were going to show some slides on gasoline prices. I'm not sure where that has gone.
Mr. Addy: I can do that as you wish, Mr. Chairman. They are charts comparing retail prices across Canada, Canada with the U.S., and Canada with other countries. It's a snapshot as of the end of March. It won't capture the rise of the last few weeks.
The Vice-Chairman (Mr. Valeri): Is it possible to have that provided to members?
Mr. Addy: Yes, we can do that.
The Vice-Chairman (Mr. Valeri): Thank you.
We have a few minutes left, so I'd like to go to Mr. Bonin.
Mr. Bonin (Nickel Belt): Mr. Addy, I've drawn my questions from comments you made to the Standing Committee on Natural Resources on June 5, 1995. I'll spare you the notes I took, but I'll bring you back to some of your comments, one of which was:
- While I'm satisfied the legislation that now exists provides the proper approach, a law is only as
effective as the evidence one is able to assemble when a genuine contravention occurs.
- I'm referring to evidence that informants and witnesses may have of communications, threats,
or other methods that...the suppliers may use to influence retail prices illegally.
- In order to improve the effectiveness of the law as it now stands, we'll be undertaking some
initiatives in the coming months.
I have a private member's bill for whistle-blowing protection. Is that the tool that has been missing for you to gather evidence? I can't see how you can gather evidence if a person is afraid of losing his job by either voluntarily bringing the information to you or by responding to your questions.
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Mr. Addy: I'd be pleased to deal with that issue, sir, and we've been looking at it. We did an internal study of the whistle-blowing experience in the U.S., and unfortunately it's not that good. It hasn't been that productive.
That's why we chose the alternative route of trying to put together a basket of issues that could help bring that evidence forward, like the 1-800 phone number and beefing up the confidentiality protections of the legislation. We're also trying to deal with prohibition orders in the amendments process. One element of prohibition orders that we're trying to deal with is to give the courts the authority to order that a company put a compliance program in place.
We released a draft guideline on compliance programs for public comment. One of the cornerstones of what we believe to be a sound corporate compliance program is the ability for people within the organization to report what they consider to be breaches.
So we're trying to go at it from the other way, and I'm quite optimistic that we'll be able to do something. But whether you have whistle-blowing legislation or not, you still end up with your final determination, which you were quite right to address. You must have the evidence to make the case. And even if the evidence isn't brought forward, ultimately somebody has to stand in a box and testify.
Even with all the protections you want...the experience that all of us have had in this...under industries there is always a residual reluctance. Ultimately the witness has to be willing to come forward and testify, whatever guarantees you have, whether it's a witness protection program - which we've considered using on occasion - or anything of that nature. It ultimately boils down to that individual's willingness to stand in the box.
Mr. Bonin: There's no incentive for that witness to stand if there's no consequence for an employer's retaliation. That's what part of the bill says: if an employer retaliates against an employee who informs, there are consequences - jail and fine.
Why not have both systems in place so people would be satisfied that there's a mechanism for employees to refuse to participate in price-fixing and to agree to voluntarily provide the information? And if there's no collusion, no price-fixing, there's no problem.
Mr. Addy: We deal with this issue every day, sir, and I understand that.
But we deal with it every day. We have people coming in with confidential information who'll say, ``I can give it to you but I don't want anybody to know''. We tell them we're going to try, but, ultimately, if you're the only person who has that evidence, you'll have to come out of the woods at some time.
More often than not, they provide us with enough information to go down our process track to a point where we can get that evidence by some other means, to the point where we'll have sufficient information to trigger a formal inquiry, the officers will go out and search the premises and we'll find the restaurant receipts and the agenda of the individual in which they made the appointment to meet at the Tim Horton's to talk about prices. We'll go in there. That's the type of information...and then we won't need to rely on that individual's evidence, so he'll be protected.
Mr. Bonin: But an individual should be able to provide you with photocopies of that receipt and not fear retaliation from his or her employer.
Mr. Addy: That raises a whole other context of issues, as you know. Removing corporate documents...there's a whole basket of problems associated with removal of corporate documents.
Mr. Bonin: Yes, we have to respect all the other laws, but under the whistle-blowing legislation the employee can refuse to participate, because this is done with or without the knowledge of their own employees.
Mr. Addy: I understand the issue. I come back to my first point. From what we've seen, it hasn't been an earth-shattering success in the U.S.
Mr. Bonin: The provinces have their legislation. Why wouldn't we?
Mr. Addy: I'm not aware of the particulars of the provincial legislation. I know there have been discussions at various points. I don't know what has actually been legislated.
The Vice-Chairman (Mr. Valeri): Thank you, Mr. Bonin.
That ends the first round of ten-minute questioning. We'll go to five-minute rounds.
Monsieur Leblanc is next.
[Translation]
Mr. Leblanc: Do you always wait for a complaint to act?
Mr. Addy: No.
Mr. Leblanc: Can you act on your own?
Mr. Addy: Yes.
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Mr. Leblanc: A moment ago, we talked about newspapers. In Quebec, we have two big companies, Power Corporation and Conrad Black, which control most newspapers and some television stations.
I don't know if there is a possibility of collusion regarding the price of advertisement - maybe not - but I think that in Quebec, we are starting to have problems regarding the control of the news, and it is fairly worrisome. I wonder if you also examine that aspect, because we know very well that when you control the news or the information, you can manipulate it a little bit. In that sense, it becomes a little worrisome in Quebec.
Mr. Addy: That is the issue I was trying to raise a little earlier, but maybe I wasn't specific enough. Editorial and news content is not dealt with in terms of competition, but rather in terms of social policy.
In fact, the Kent Commission recognized that it had to be done through special legislation. The United Kingdom has adopted a special legislation dealing with the acquisition of interests in newspapers, and so on. As far as I'm concerned, under the act, my responsibility covers the various aspects of competition. I am not allowed to go beyond that.
Mr. Leblanc: That is business only, monetary competition.
Mr. Addy: That's correct.
Mr. Leblanc: What you're telling me essentially is that there is no legislation protecting us against news or information monopoly in Canada.
Mr. Addy: No. We have challenged nespaper acquisition twice, I believe, in the cases of Irving and Thomson. We have raised that issue, but we were ruled out of court. It was under a less specific legislation. The threshold was the public interest. Now, the threshold is a decrease in competition. I recognize that this was the criminal onus, but even with such a threshold, the court said that it had nothing to do with our efforts.
[English]
Mr. Bocking: There's one other that doesn't relate to us. I believe the CRTC, when it's looking at the issue of cross-media ownership as between radio and TV, would look at one factor in the consideration of licensing, which is whether or not there's ownership of newspapers. I'm not sure how that actually factors in, but I believe they look at that issue.
[Translation]
Mr. Leblanc: That's correct. We say that our editorial writers, our journalists are independent from newspaper owners, but we know full well that they often risk losing their job and that they know for a fact that they will lose their job if they give a statement that goes against the owner of the newspaper or the television channel in question.
I know it is not an easy thing to judge and to resolve, but if there's no monopoly and if there is a good competition between the newspapers and television channels, generally there won't be any problems. But we are starting to see considerable concentration, at least in Quebec.
Mr. Addy: Mr. Leblanc, I am sure that if Hollinger was here today, they would tell you that you have nothing to worry about because there are other sources of editorial content and you can always go to the weeklies or elsewhere. That would be their reply.
Mr. Leblanc: We know what is going on right now particularly in the case of radio stations. They can no longer afford to keep journalists. Therefore, editorial writers are reporting the news.
If editorials writers of all radio stations in Quebec and of the four or five main newspapers were to report the news, we know what kind of influence it could have. The control of news by editorial writers in Quebec is disturbing.
Mr. Addy: Another element comes into account here. I understand that according to tax regulations, for a newspaper to be entitled to a deduction for its advertisement expenses, it must be 75% Canadian-owned.
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[English]
The Vice-Chairman (Mr. Valeri): Mr. Schmidt.
Mr. Schmidt: I'd like to return briefly to the tied selling question. I quite understood the second level of how it affects the competition in the area and whether it will effectively reduce the competition. It seems to me there's another principle involved here, and the principle is not merely one of competition as it exists within that market area of, let's say, financial institutions. It seems to me the principle that ought to be involved here as well is the choice the consumer has, which in this case I mentioned before - we'll stick with that case - has actually been eliminated. Competition for that person, for that consumer, is virtually non-existent.
So at one level you can argue very effectively that if one institution does this and they do it to two or three people, that's no big deal, competition hasn't been affected - and it's true, it hasn't. But for those three individuals who are affected - or it could be a company - with a group plan for a pension plan for example, it could be rather substantial. So while it hasn't changed the overall marketplace and the competition there, it has effectively destroyed decision-making opportunities and choice.
How does that fit in with your...?
Mr. Addy: There are two levels of response to that, sir. The first is again the design of the legislation. It's designed to protect the dynamics of competition in the marketplace, not necessarily designed to protect an individual competitor. It's designed to protect the dynamics of competition.
The other issue you would have to look at in that case is whether the consumer was unable to secure or purchase mutual funds from another entity. Are mutual funds a separate market or are other investment vehicles equally substitutable products? That's the type of analysis we'd go through. Perhaps in that case the consumer, whoever was making that acquisition decision, didn't pursue other alternatives in other areas. The assumption, I assume, although I don't think you said it.... Are there only two banks in the world, and only one mutual fund?
Mr. Schmidt: No, the case has perhaps lost the detail here. The case as I illustrated it or tried to set it up was it's a financial institution that's in the lending business and there's another financial institution that's in the RRSP business. It could be a mutual fund, it could be another bank. There could be two banks here, for example. I'm not restricting it to banks or any other kind of group but simply saying the individual involved in both instances, applying for a loan over here and having an RRSP over here, is told ``Look, if you want this loan over here, you must move your RRSP over here''. You don't have an alternative to go anywhere else. You either go over here with your RRSP completely.... So regardless of how many different ways he might want to pursue it, he doesn't have that option. This loan is conditional on his moving the RRSP over here.
Mr. Addy: I guess we fall back to the second test. But the first issue is whether that is the only place here he can get a loan.
Mr. Schmidt: Okay, that's a very good assumption. I'm assuming that is the case.
We won't pursue that any further here and now. We'll pursue that in another meeting.
I'd like to move into the other area, which has to do with the whole business of convergence, if you will, that's happening now in the telecommunications industry, in particular the granting of licences to persons or companies that want to get into such things as LMCS or PCS and the granting of those licences by another department - it has nothing to do with you - in effect restricting what happens in that particular area. There may be other competitors, but the licensing is restricted. It's not that no more space is available. Space is available.
We'll use PCS in particular, where three 16s, I guess it was, and three 8 MHz were available, yet two were granted in each case, so one was left open. So the competition is immediately restricted to two rather than the three that could have been done but weren't done, for I don't know what reason. Whatever the reason was, it wasn't done. That's restricting competition at one level. It's a pretty abstract kind of awareness, yet it's very real for the third applicant, who's denied a licence.
Mr. Addy: I understand that issue very well. As I mentioned, telecom matters are front and centre on our plate.
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The issue there is what is the competitive construct of that market? The people with PCS licences, for instance, I would suggest would be competing with the local wire line telco. They'd be competing with Bell. They may end up competing with Internet phone service providers, which are starting to pop out now.
So, from the competitive perspective, although there are only two licences under the current round, there may not be a negative competitive effect, because it's not a unique technology, and that's the exciting thing about conversions. You're getting competing technologies - not just individuals, but competing technologies - to deliver the same signal.
The Vice-Chairman (Mr. Valeri): Thank you, Mr. Schmidt.
Mr. Schmidt: It's been five minutes already?
The Vice-Chairman (Mr. Valeri): Yes, unfortunately.
Mr. Shepherd, please.
Mr. Shepherd (Durham): I'm sorry if any of this is redundant, because I missed the first part of this, but how do you go about calculating and imposing fines? I don't see a schedule of fines. How do you arrive at the imposition of fines?
Mr. Addy: It's a lot of hard work. In Canada we do not have a sentencing guideline. In the U.S. there's actually a formula set out in the law.
In the bureau we've developed internal principles for the imposition of fines, but the ultimate discretion on fines is the court's. We factor in a whole host of issues on that, and Mr. Mercer can speak to that much more eloquently than I. We deal with things such as how long the offence has been going on, how much a commerce has been affected by the offence and things of that nature, and we'll try to have a ballpark figure.
I've made no secret of the fact that when I assumed this position one of my priorities was to get fine levels up because I was concerned that they weren't sufficiently high to create a deterrence. We've been doing that.
Perhaps Mr. Mercer could give you a bit more insight into the principles we apply.
Mr. Don Mercer (Acting Deputy Director of Investigation and Research, Criminal Matters Branch, Competition Bureau): The first point to understand is that the fines in this country are based on the jurisprudence, but we're trying to signal to the courts the importance of getting the fines up as a means of deterrence. Conspiracy - i.e., what to people is generally known as price-fixing - is a very serious criminal offence. Certainly in the cases since we developed the sentencing principles in the last two years, we've been trying to put those principles across to the courts.
In the case that was referred to earlier, Canada Pipe, which was on September 27, 1995 - a very recent case - that fine of $2.5 million was the maximum fine ever obtained for a single count under the conspiracy provisions. That was a guilty plea, so we did not have a contested trial. In order to get that result - and this is a matter of very great importance to us - we had cooperation of the parties. So that was a factor.
Mr. Shepherd: Would you call that plea bargaining?
Mr. Mercer: Well, we don't call it that, but there are some aspects of cooperation. If people come in and tell us they are aware of somebody in their company committing an offence, that is a level of cooperation that obviates the need for us to spend a lot of public funds doing an investigation.
Mr. Shepherd: I'm looking at a report that says since 1994 the total fines imposed have been $2,724,150, of which $1,778,900 is still outstanding. It seems to indicate there is a significant amount of arrears. In other words, what they're saying is you don't collect the stuff. Is that true?
Mr. Addy: Maybe I can address that. The fines are imposed, and recalling that the prosecution is undertaken by the Attorney General, the responsibility for collection doesn't rest with the bureau. It rests with the Attorney General. I don't know how they go about doing that process.
It was $2 million in that year, and one thing I'm quite proud of is it was $3.6 million the following year, and for the year ending last March it was $5.6 million, so we are going up the ladder.
Mr. Shepherd: But of that, how much has been collected?
Mr. Addy: I couldn't tell you, offhand. I don't have that data.
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Mr. Mercer: Virtually all of that sum has been collected.
The other thing the courts do sometimes has happened in a couple of instances recently. They have ordered that the fine be paid over a certain period of time. In one case half the fine, around$1 million, was paid in one fiscal year and the other part was paid just recently. So you get into an accounting problem there.
Mr. Addy: We've had some now where part of the settlement is that they show up at court with the cheque for $2 million or whatever the amount is.
Mr. Shepherd: I guess it's just a matter of looking at the situation. We see a plea bargain; we get consent; we presumably reduce the fines to get their consent, and then they turn around and don't pay anyway. It would seem to indicate that you don't have a lot of clout.
Mr. Addy: Well, no. Don corrected me because I'd forgotten our collection rate. The payment rate has been a lot better in the last couple of years because we are insisting they show up at court with a cheque.
Mr. Shepherd: Maybe you can provide the committee with some statistics about what the outstanding arrears are.
Mr. Addy: Sure.
Mr. Mercer: I was just mentioning that in the Canada Pipe case we had an arrangement whereby that fine would be paid within 15 days. It was paid within a day or two of the court case.
The Vice-Chairman (Mr. Valeri): Thank you, Mr. Shepherd.
There are two members left on the list: Ms Bonnie Brown and Mr. Leblanc.
Ms Brown, please.
Ms Brown (Oakville - Milton): Mr. Addy, at the beginning you gave a definition of ``competition'', and over the course of your discussion this afternoon you've been asked questions about several specific cases. You used this phrase all the time: ``We found no evidence of contravention of the Competition Act''.
Does this Competition Act, as modified in 1986, give you the powers you need in order to make sure that the market in Canada and the players in the market are in conformity with your definition of ``competition'', the ideal state that you explained at the beginning? Or, through the changes to the act, have we settled for a lesser degree of perfection in competition? Would you, as the administrator of this act, like to see us amend it to give you the levers you need in order to make sure that the market is truly competitive?
Mr. Addy: Let me start with the first question. In my view, the legislation as a model is the right model. The approach of a bill that is structured around a bureau that acts as a border guard, as opposed to a day-to-day regulator that is monitoring and telling people what levels of prices and service and so on, or entities, companies, whatever...I think our model, the border guard model, is the right one.
As to whether or not some amendments are required, the minister invited me to pursue that issue. We have. We launched that last summer. I think there is a need to update the law in certain areas.
One area of particular concern to me, which is under examination now, is our ability to cooperate with foreign agencies. As markets globalize, so does anti-competitive conduct. While I suffer from jurisdictional limits, boardrooms don't. Parties who are willing to engage in anti-competitive practice can do so freely. They actually play on the lack of coordination, cooperation, or whatever, between enforcement agencies.
Classic examples of that are telemarketings. They'll set up shop in one jurisdiction and dial out to the other jurisdiction, knowing full well that they can't be caught.
Some tools are there now. We have a mutual legal assistance treaty, which has been in place since 1990, dealing with criminal matters. So that's only part of our legislation.
I would like to see that same ability on the civil side of the act so we could deal with things such as abusive dominance, merger review, and those civil practices and have an ability to dialogue quite candidly and cooperate with foreign agencies.
The success rate of cooperation on the criminal side has been fantastic. We've had three perfect examples of how well that works.
There was a fax paper case, which is still ongoing, but we've already achieved pleas from some of the entities. That started with a complainant in Toronto saying, ``I can't get thermal fax paper at a decent price, and I think they're all fixing the prices''.
We have this treaty in place, which allowed us to go to the Americans and say, ``We think there's some evidence in your jurisdiction. Please get it for us.'' They used formal process in the U.S. to get that evidence, realized that their market was being targeted as well, and by virtue of cooperating jointly in the investigation and prosecution, they've got $6 million so far in prosecutions and fines in the U.S.
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I think we've got a couple of million dollars.
Mr. Mercer: A couple of million dollars.
Mr. Addy: There are still things ongoing. That was a great case. That was a joint one.
We had a Canada Pipe case, the one last September. It's a company in Quebec. Je ne me souviens plus de quelle région du Québec. Two American firms were saying to cut off this guy in Quebec. They were saying you can have the Canadian market. They won't supply him any more. Nudge, nudge. Wink, wink. It's a conspiracy. The supply is cut off.
The perpetrators are outside our jurisdiction. We used the MLAT process, got the evidence, and got the fines and prosecutions. It was a great story. I'd love to be able to do that on the other side of the legislation.
Ms Brown: You've given me two excellent examples about things that people can touch as they buy them.
I'm like Mr. Schmidt; I'm far more concerned about the accumulation of power in too few hands in communications, the dominance in single-owned media of one set of ideas or one ideology, politically, if you like, but it could be religiously. It could be any one of a number of areas of thought.
Do you have one good example in that area? To the public, you have some200 full-time-equivalent employees. If something comes up like Conrad Black and the Hollinger newspaper case, your bureau looks toothless to them because nothing is done.
The average Joe maybe doesn't care as much about the fax paper case. I'm sure it was thrilling and great that you did it, but they do care about the dominance of power, particularly in the media.
Mr. Addy: I understand the issue, but I think to be fair, a consumer should care about the thermal fax paper because they're buying it for their machines. They should care about the Interac case because we all use ABMs.
But when we get into issues like editorial content and thought control, if that's the issue, that isn't competition. We're not the right forum to do it. That's the dilemma I face.
Ms Brown: What is the right forum to talk about that?
Mr. Addy: I don't know.
Ms Brown: What about this buying and merging of newspapers, laying people off and closing shops down? Isn't that any of your business either?
Mr. Addy: You have to understand that the framework of the legislation is efficiency. There are occasions in which people get laid off. It's part of restructuring. That enterprise has now got a lower cost base and will be able to compete more aggressively in Canada or in foreign markets. That's what we have to factor into our equation.
Ms Brown: I understand. So my concluding remark is that maybe we need a bureau of cooperation or social cohesion that has as much power as the bureau of competition, because if that kind of behaviour is okay and that's the ideology behind it, then maybe it isn't the best for the people of Canada either, even if their fax paper is cheaper.
The Vice-Chairman (Mr. Valeri): Thank you, Ms Brown. Mr. Leblanc.
[Translation]
Mr. Leblanc: For a Canadian business to be able to compete with an American business, it must be part of the monopoly, in certain cases. I suppose that you've compared your Bureau with the competition tribunals of various industrialized countries. Could your competition Bureau negatively affect our ability to compete on the international market, considering the opening of new markets in the coming years?
Mr. Addy: I can say without hesitation that on the contrary, many outside agencies view our legislation as a model. It is very important to understand - by the way, I had a slide on this - that when we study a transaction, we do it in the context of a market.
Mr. Leblanc: The world market?
Mr. Addy: It depends on the industry. From an analysis point of view, our market is not a political one, i.e. we are not limited to Canada's borders, those of a province, of a city, etc. We study the activity and its effect on the competitive market for that sector.
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There have been mergers that left only one unit in Canada. One could talk about a monopoly, but it is not a monopoly because it is not a world market. We don't have any problem with that. The legislation allows for a merger if the entity can show that such a merger would allow for greater efficiency gains than the negative impact it could have on competition.
Mr. Leblanc: That is not what I mean. There could be mergers that would lead to some kind of monopoly in Canada but that would increase our competitiveness with the United States in that sector.
Mr. Addy: Exactly.
Mr. Leblanc: What would be your reaction in that case?
Mr. Addy: I would say that it wasn't a monopoly because a monopoly would imply that the market was in Canada. I think the commercial market wasn't limited to Canada and that in fact it was North American.
Mr. Leblanc: It could have the effect of creating a monopoly here in Canada.
Mr. Addy: No. Let's take the case of the Michelin tire factory. A market study showed that the market for the production and the sale of tires was at least North American and probably global.
How did we come to that conclusion? We did a market study. We studied how the market worked. Companies like Canadian Tire and Sears put out tenders to find suppliers throughout the world for their tires. One year the contract can be given to a Yokohama company and the next year to Michelin or to an American company.
A merger was possible because our Canadian law is flexible since it was shown that the market didn't limit itself to a province or to Canada but that it was global.
Mr. Leblanc: In other words, you think that the Act does not impede our competitiveness at the international level.
Mr. Addy: I believe the Act is sufficiently flexible for us to be competitive on the international market.
[English]
The Vice-Chairman (Mr. Valeri): Thank you, Mr. Leblanc.
Was there something you wanted to add?
Mr. Bocking: I'll wait till the end, but I would like to respond to Ms Brown on the issue of the newspapers and make a few other comments, if I may.
The Vice-Chairman (Mr. Valeri): Sure.
Mr. Schmidt, please.
Mr. Schmidt: I think your job must be absolutely exciting. You get into natural resources, gas pricing, telecommunications, competing technologies, globalization, and monopolies in Canada and internationally. I think it must be absolutely fantastic.
I sure would like to know how you would support the position of foreign ownership restrictions on telecommunications companies.
Mr. Addy: I am on record as saying that from a competition policy perspective, no foreign ownership restriction is consistent with competition policy, free access to capital, and free access to intellectual capital. Again, I'll qualify that; I'm speaking just from the competition policy perspective. There are a whole bunch of other issues that the government and you ladies and gentlemen have to take into account in making that type of a policy direction.
Mr. Schmidt: I didn't think you'd say that, but I'm sure glad you did. I think that is a major issue. You said clearly that if we consider Canada a monopoly, that just isn't the case any more.
Mr. Addy: The representations we've made to the CRTC and the bureau and what I've said in my testimony before the CRTC has always been to lower barriers to entry to the extent possible so that you can have more competitors in the marketplace and lower the regulatory burden.
Mr. Schmidt: Mr. Chairman, I wouldn't want to stop that. Thank you.
The Vice-Chairman (Mr. Valeri): Thank you, Mr. Schmidt.
Mr. Bocking, you had some closing remarks?
Mr. Bocking: Yes, I'd appreciate one final comment. I'm sure it will be quite topical when everyone gets home today and watches the news. I'm sure there are going to be lots of phone messages for me when I get back, too.
I'm a little sensitive to the comments that are made that the act is toothless and ineffective when it comes to newspapers. I think you have to ask whether the Competition Act is the proper vehicle for dealing with issues such as that.
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The way I look at it, when you look at the purpose section of our legislation, the current Competition Act, it talks about efficiency in the economy. Competition is a way of achieving that efficiency. That's what our act is all about: it's a means to an end. When you take absolutely important and crucial issues such as editorial control and diversity and independence, and try to force fit them into a lawyer's or an economist's competition analysis, it becomes very difficult.
When George asked me to come along today, I think he asked me to come for the mergers branch but also on these issues. I went back and leafed through my Kent commission. We had a little involvement with Kent back in the 1980s, and as young as I look, we had some involvement with Irving in the 1970s in the monopoly case.
Mr. Kent made this comment: ``It is the Commission's considered view, however, that competition laws, regardless of how strengthened'' - and this was part of the 1986 amendments - ``are simply inappropriate to the regulation of monopolies in the newspaper industry.''
He went on to say:
- The simple, inescapable fact is that newspapers are not like other business ventures. The
public's interest in vigorous competition among newspapers is not one that can be quantified in
any dollars-and-cents terms. It has to do with the number and quality of independent voices
finding expression, voices undaunted and undiminished by dollar concerns.
The Vice-Chairman (Mr. Valeri): Thank you, Mr. Addy and all of your colleagues, for coming before the committee today, for your presentation and for committing to being available to committee members at some point in the future.
The meeting is adjourned.