Competition Law In Canada Since The 2009 Amendments

Thursday, August 21, 2014 - 14:45

The Editor interviews Paul Collins, the head of the Competition and Foreign Investment Group. He practises corporate and commercial law and specializes in the area of competition law, providing both transactional and general compliance advice as well as advice in the area of marketing and advertising law.

Editor: Let’s put the issue of “convergence” at the beginning of this interview. In your view, are our two countries on a path to harmonization in Competition Law? Or are there simply some points of administrative similarity?

Collins: I do think that Canada and the U.S. are not only on the path towards harmonization but that they’ve already gone a long way along that path – well beyond just points of administrative similarity. Things really changed in 2009 when the law was amended here in Canada particularly to align with the U.S. in two key areas. The first related to mergers. Substantively, our two countries were always quite harmonized, with some modest distinctions (for example, you folks use the Herfindahl-Hirschman Index (HHI); we tend not to use HHIs). So in terms of market definition or merger enforcement guidelines, all things related to mergers substantively had long been quite harmonized. What changed in 2009 was harmonizing the process, but it went far beyond just administrative similarity because it’s very difficult, in my view, to sever process from substance when it comes to mergers. So now, on the merger front, we’re very much harmonized on both substantive and procedural levels. 

The second big change was to our treatment of conspiracy. We had a qualified test before 2009. We’ve now attempted to codify in our statute what has evolved in the U.S. after many years of jurisprudence. So again there, I think, we have harmonized significantly.

Editor: Has the two-step pre-merger notification procedure inaugurated in Canada in 2009 functioned effectively? Is it fair to compare this procedure with what you understand to be Hart-Scott-Rodino requirements in the U.S.?

Collins: I think the procedure has worked quite well. When it was introduced in 2009 there were learning and growing pains both among merging parties (and their counsel) and at the Competition Bureau. I think that process went about as well as one could reasonably hope. I’m a little biased because I was at the Bureau running the mergers branch between 2010 and 2012 and was very involved in trying to ensure that that was the case. In two of the five years since that’s happened, I was very involved in trying to transition into this regime in a smooth fashion. We had the advantage in Canada of learning from the U.S. experience of Second Requests under Hart-Scott-Rodino and being mindful of the criticisms of that process and trying to introduce the regime here in Canada in a slightly different fashion. Some examples include: we have pre-issuance dialogue in Canada, and I think that has worked quite well. That’s not the case in the U.S. We tend to be considerably more surgical here in the questions that are asked; it’s not so much of a “kitchen-sink” kind of request. In terms of negotiation and discussion, more occurs in Canada prior to issuance than is the case in the U.S.; more of that occurs in the U.S. after issuance. There are clearly some distinctions. Again, I think the procedure has functioned well. I don’t mean to be critical of the U.S.; I just mean that we had the significant advantage of having seen how the H-S-R regime has operated in the U.S. and have been able to take some steps to prevent our regime from subjecting itself to some of the same criticisms.

Editor: How have the major elements of the 2009 legislative amendments to the Canadian Competition Act, that you’ve already mentioned, changed Canadian business and legal practice?

Collins: If anything I would say it’s a bit surprising to me how little has changed in terms of the conduct of business in light of the 2009 amendments – but it’s evolving, and I think it just takes time to work its way through decisionmaking in various organizations. I think part of the reason for that is that people for the most part were conducting themselves in those areas on quite a conservative basis. In other words, they weren’t taking advantage of the more liberal treatment and the undue lessening test that existed under our conspiracy provisions, for example. I don’t think people were hinging their behavior on that, so it didn’t cause dramatic change. One example that’s worth mentioning is that we had a draconian per se criminal treatment of price maintenance and now we have civil treatment, and we’re starting to see businesses opening up to take advantage of the more liberal legal treatment. I think it just takes time. When people have been conducting themselves in a certain fashion and have entrenched protocols within their organizations, making changes takes a while, and we’re starting to see a little bit of that now.

Editor: That’s on the business side. Is there anything on the legal side, from your perspective as a practicing lawyer?

Collins: Certainly. The big thing that has occurred over the last few years is that we’ve been educating clients about the 2009 changes. For example, we’ve been educating clients who didn’t have a leading market share but had a respectable market share and probably were on pretty safe ground under the previous version of Section 45 of the Act (relating to agreements among competitors) of the need to be concerned about the new version of Section 45. So we’re educating clients to be conscious, but we’re also educating clients to take advantage of more liberal treatment and what they can do proactively.

Editor: Has 2013-14 been an active year for the Federal Competition Bureau under its new commissioner?

Collins: I think it’s been fairly active. It’s been a year of transition to a new commissioner, although the commissioner has been in that role on an interim or “permanent” basis for close to two years now. He’s been very vocal and active in getting in front of various constituencies. He has revitalized certain parts of the statute from an enforcement perspective. There seem to be more active formal inquiries as opposed to informal investigations. There’s a lot of discussion about transparency. I think it’s been a fairly active year.

Editor: What has been the role and posture of the Competition Tribunal?

Collins: The Competition Tribunal obviously is reactive in the sense that it is not like the commissioner who initiates matters. People go to the Tribunal. I would describe the Tribunal as being very rigid and technical in their interpretation of the statute and the application of its provisions. We saw that in the credit cards case in particular, where the Bureau brought a case (although it was a prior commissioner who initiated the case) under the price maintenance provision, and the Tribunal was not receptive to that theory of the case. They’ve been rigid and technical in the application of the statute to various conduct. They’ve also not been particularly deferential to the guidance that’s issued by the Bureau. The Bureau, like other antitrust regulators around the world, issues a fair bit of guidance to give the business and legal communities a sense of its enforcement practices, while the Tribunal has been very focused on the law and the application of the law and has not treated the guidelines as, effectively, law. They’ve not been as deferential as one might have expected they would be.

Editor: Historically, competition policy in Canada has been seen as less politically driven than antitrust policy in the United States. Are there major differences in approach to competition issues among the principal Canadian political parties, or is the historic attitude still true?

Collins: I think that the lines are much more blurred here than they are in the U.S. I think a lot of that also stems from the appointment process. We don’t tend to connect the actions of our Competition Bureau to the party in power. I would say that historically what you describe is absolutely the case. I think we’ve seen some very modest signals to the contrary, in two areas in particular. On cross-border price discrimination, the federal government has made clear that they view that as a significant issue –  and they’re foisting that issue onto the Competition Bureau whether the Bureau likes it or not. And the government has been very vocal about their views of competition in the wireless communication sector. I think we’ve seen that translate into a Bureau that’s very active in commenting on developments in that particular area. It would probably be an overstatement to call that politically driven, but I think we’re seeing a minor sign of  more of that in Canada than we might have seen historically.

Editor: Would you explain the extent to which violations of Competition Law are prosecuted criminally in Canada, and how those violations differ from conduct that is treated as a civil but not a criminal offense?

Collins: Generally speaking. as one might expect, it’s the more egregious conduct or the conduct that is unequivocally negative for the marketplace (like a conspiracy or a bid rig) that is treated criminally. The majority of the conduct that the Competition Act oversees is treated civilly. That’s because, for a lot of that conduct such as exclusive dealing, refusal to deal or abuse of dominance, there can be pro-competitive market outcomes. It’s a rule of reason. Exclusive dealing can motivate investments; it’s not necessarily damaging to the marketplace. Those provisions are treated civilly. Then there are some provisions that are hybrid. For example, the advertising provisions of our Act can be pursued either criminally or civilly, at the option of the Bureau. The Bureau has put out considerable guidance on when they will select one path over another. So if you had to generalize, you’d say that conduct that is unequivocally harmful tends to be dealt with criminally, obviously to deter that kind of behavior.

Editor:  Finally, would you describe for our U.S. readers the hierarchy of courts in Canada in which Competition Law violations can be brought?

Collins: This is a continued area of significant distinction between Canada and the U.S. in that there’s still quite limited scope for a party to bring a private action in the context of a Competition Law matter in Canada. It remains the case that the commissioner is, if not the sole gatekeeper (which is still the case for a number of provisions), at minimum the key gatekeeper for bringing a case forward. There are some provisions that can be pursued on a private basis but only with leave of the Tribunal or a court.  That’s very different from the U.S. and explains why we don’t have nearly as much jurisprudence, even on a relative basis. The cases that do tend to be brought are class actions or follow-on actions from guilty pleas or settlements with the Bureau. That raises the ability for people to seek (single) damages, and so we’ve seen class actions in the area of competition law grow dramatically over the last 10-15 years. The Competition Tribunal is essentially the court – the specialized court – which is the key adjudicator of all the civil provisions of the Act. You go there whether it’s mergers or any of the other Part VIII matters. Then there’s the federal court and the Federal Court of Appeal and then the Supreme Court, when you’ve gone through the Tribunal Process first. If it’s a criminal matter, then you’re into the traditional criminal court system and are working your way up, again, ultimately to the Supreme Court of Canada.

 

Please email the interviewee at pcollins@stikeman.com with questions about this interview.