Canadian Heritage Committee on Feb. 14th, 2017

[The Chair, Liberal, Hedy Fry]

Actually, I will tell you that I am not wrong. I'm just reading the Criminal Code, and subsection 372(1) is about “false information”.

As well, subsection 298(1) reads as follows:

A defamatory libel is matter published, without lawful justification or excuse, that is likely to injure the reputation of any person by exposing him

—or her—

to hatred, contempt or ridicule, or that is designed to insult the person of or concerning whom it is published.

There are some clear pieces. By using the telephone to do such a thing, the telephone company has a liability under law to be able to find out who that person was, etc. There is some clear content in the Criminal Code.

What I'm saying is that other groups are responsible. They have to verify and be responsible for what goes on. This is really what we're asking about today, about the fact that if you're going to call something “news” or if you're going to spread false messages that harm someone.... I mean, I would never say “poor Ms. Palin”, but there you go. She's now saddled with having said the most idiotic thing, but she didn't say it. Tina Fey said it on Saturday Night Live.

I think there is responsibility on...which is where the term “false news” is coming out now, that it is in fact occurring. You can sue a newspaper. You can sue television. You can sue for any of that in the Criminal Code.

Is that going to make a level playing field? Should there be a level playing field? I'm not saying that it's my opinion one way or another. I have been asking this question. It is a confusing question for me, and I'd like to hear your take on it.

At any rate, you said it would be impossible for you to do, but it is something I wanted to put on the record—that I don't understand and am confused about it, and I wanted to have some clarification on it.

Did you have something you wanted to say?

[Kevin Chan]

I think Jason had a very good perspective on it, but I would just continue, if I may, with all due respect, Madam Chair, with the analogy of the phone.

As you were saying, liable laws obviously would apply on Facebook as well, but it would apply in the same way as you illustrated with the telephone in the sense that the individual who uttered those words would be the one liable. I think similarly on Facebook, we have very strict community standards. Where people are saying and doing things that are unlawful, those things are removed from the platform. Certainly parties can pursue other parties for violation of Canadian law.

We have great relationships, as I noted earlier, with law enforcement. We co-operate with them to make sure that they have the evidence they need to prosecute as appropriate.

[The Chair, Liberal, Hedy Fry]

I'm not talking about prosecuting. It's the responsibility for news to be not only verifiable but accountable. That's what we're talking about here. That's simply what I'm asking about.

At any rate, thank you very much for coming. I appreciate your coming on short notice to shed some light on the things we wanted to discuss since your December appearance. Thank you.

We will suspend for a few minutes while we get the next group in.

[The Chair, Liberal, Hedy Fry]

Welcome. I'm sorry you don't have an hour because of the votes. We've been cut down to size here.

I want to thank Mr. Brazeau from the Competition Bureau for coming.

I know both of you are here. We just wanted to clarify some of the information you gave us at the beginning of this study, because one of the things the study was mandated to look at was the effect of media consolidation.

At the time we spoke to you, there had just been the consolidation of the newspapers not long prior to that, so you commented then. Since then, a year has gone by, and some new things have surfaced with regard to the result of that consolidation. We just wanted to know if you had any update or other commentary to give us, or if you felt there were some things you could enlighten us on regarding this issue.

You have 10 minutes, please, and then we will go to a question and answer period.

[Julien Brazeau, Associate Deputy Commissioner, Competition Promotion Branch, Competition Bureau]

Thank you, Madam Chair, and good afternoon.

As you have mentioned, my name is Julien Brazeau. I am associate deputy commissioner at the Competition Bureau, and I'm joined by my colleague, Anthony Durocher, who is deputy commissioner of the mergers and monopolistic practices branch at the Competition Bureau.

My understanding is that the committee does have some outstanding issues or questions regarding the Postmedia-Sun transaction, as well as the “no action” letter the bureau released upon concluding its review.

During our previous two appearances before the committee, my colleagues and I outlined the manner in which the bureau conducts merger reviews, as well as the factors that are taken into consideration.

It is important to reiterate that in the context of merger reviews we take a look at a number of factors, including the level of economic concentration in a given market and the market shares of the merging parties, the degree to which the merging parties compete with one another, as well as the presence or absence of legitimate and effective competitors that can curtail the exercise of market power by the merging entity.

In examining a merger, the bureau obtains information from a wide variety of market participants, including suppliers, customers, regulators, and competitors.

I would stress that when reviewing mergers, the bureau's focus is on economic competition and efficiencies related issues such as the impact of the merger on prices or, in the case of media mergers, advertising rates and readership. As you well know, in conducting our analysis, we are bound by the four corners of the Competition Act. The factors that are to be considered in a competition analysis are set out in section 93 of the act, as we stated during our last appearance. It is important to note that it is the combination of factors—not the presence or absence of a single factor—that is determinative in the bureau's assessment.

While the bureau's focus is primarily on price and output, we also consider the proposed merger's likely effects on non-price dimensions of competition such as quality, choice, service, and innovation. These factors are approached from an economic lens and considered especially in markets in which there is significant non-price competition.

Let me now turn to what occurs when the commissioner decides not to challenge a transaction. This is done when, after a thorough review of the evidence, the commissioner is satisfied there will be no substantial lessening or prevention of competition, or that there are efficiencies which are greater than and offset any anti-competitive effects. In such a situation, the commissioner may issue a no action letter, indicating that he has decided not to challenge the transaction at that time but reserving the right to do so within one year following closing of the transaction. That is the statutory limit in this regard.

As a practical matter, given the extensive collection and analysis of information in a complex investigation such as Sun/Postmedia, a no action letter is regarded as an effective form of clearance on which parties can rely to close their transactions. To reopen a merger investigation in a case where the bureau has already provided the parties a no action letter, the bureau would likely require some new evidence, within the first year post-closing of the transaction, which materially affects the bureau's competitive assessment in the first instance.

I know that the committee is well aware of the March 25, 2015, statement regarding the commissioner's decision to issue a “no action” letter in his review of the Postmedia-Sun transaction. That statement contained the information that the bureau was able to publicly disclose at the time of the merger review.

It's worth repeating that the bureau conducts its investigations in a confidential manner and that all information that's gathered, whether it be through voluntary disclosure or through formal powers, is kept confidential. The law requires that we do not comment publicly until certain steps have been taken, such as the issuance of a “no action” letter. Even in those instances, we are required to keep confidential any information that is not public. This is to ensure the integrity of our investigations and to ensure that information provided to us by the parties or third parties, information that can be sensitive at times, is kept confidential.

Finally, I'm aware that this committee has expressed concerns over job losses that have occurred, especially follow the Postmedia-Sun transaction. While we recognize that mergers can unfortunately have a negative impact on jobs, the purpose of the bureau's review of a merger is to determine whether it's likely to result in a substantial lessening of competition or prevention of competition in a given market. That is, it's a market-power based analysis focused on price, output, and non-price dimensions of competition.

In the Postmedia matter, the bureau found that the print newspapers and the markets in question were facing a steady and continuing decline in readership and that the parties' ability to exercise market power was constrained by existing market conditions. Under such conditions, job losses, while painful to those who are impacted, are often the result of a competitive process as firms work to align costs with demand or realize efficiency gains.

I would also note that the bureau's release made reference to the parties maintaining separate editorial boards. However, this was not a factor in the commissioner's decision to issue the “no action” letter. Rather, these facts were included as information in our position statement on the review.

The focus of the bureau's review was not on what the parties said they would do, but rather on whether they would have enhanced market power. Based on a review, the evidence and economic analysis did not establish that the merged entity would have enhanced market power, and no subsequent information or evidence has caused us to re-examine that conclusion.

Following the conclusion of a merger review, companies involved are not required to consult the bureau on their future business decisions unless they've entered into an agreement to remedy an anti-competitive harm found during the review. In the case of the Postmedia-Sun transaction, we did not find a need for a remedy, and they are therefore not obligated to consult with the bureau on business decisions, including those related to staffing.

Of course, the commissioner of competition is able to address abuses of market power and other anti-competitive conduct or information or evidence that raise competition issues and come to light, including after the completion of a merger.

I know there are many other issues of concern, as you've raised already, Madam Chair. I'll conclude my remarks here, and my colleague Anthony and I will do our best to answer your questions at this time.

[The Chair, Liberal, Hedy Fry]

Thank you very much.

Now I go to the question part, which is a seven-minute segment, and that includes the question and the answer. I hope that we can get in as many questions and as many answers as we can.

I would like to begin, from the Liberals, with Mr. O'Regan.

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

Thank you both very much for coming. It's extremely important that we're able to talk to you again given the current media climate, and given I think the increasing urgency of this report.

I don't want to get into any specific merger because, as you said, there are confidentiality issues. I guess what's important here is to look at where we are right now. As I understand it, and this was research that was done out of Carleton University and its Canadian media concentration research project.... It's quite thorough. When you look, it makes the argument based on market share that we have the highest concentration, highest level of vertical integration, across media ownership of the 28 countries that they studied, which were mostly European markets or large markets like China, India, and Egypt.

When you are looking at a merger acquisition, does that factor in? I'm not leading anywhere with this question; I'm quite honestly wondering. Is the end result not within your jurisdiction?

[Julien Brazeau]

I'll jump in, and then I'll let Anthony speak to the specific criteria that we look at in the context of a merger.

Absolutely, we will look at the level of concentration in a given market and what impact that might have. To the extent that we're looking at a transaction, we will try to predict what impact that transaction will have on competition in a given market. Absolutely, those are things that we consider, but I'll let Anthony respond.

[Anthony Durocher, Deputy Commissioner, Monopolistic Practices Directorate, Competition Bureau]

To your question on vertical integration, the answer is that it's absolutely something that we would examine in the context of a merger. Of previous examples of vertical integration mergers that the bureau has reviewed, one would be the Bell Media-Astral transaction. That is one where we did require a remedy to address the competition concerns flowing from that merger.

Historically when people think of competition law, they think about horizontal competition, about two companies that compete head-on with one another. Equally important is being mindful of vertical integration, where companies may have an incentive to foreclose access to key inputs to competitors. There is a framework in place that we would apply in vertical integration mergers to ensure that access will not be foreclosed to competitors unduly, which could harm competition. It's something that we're absolutely mindful of, and we have taken action in the past to address vertical integration in the media space.

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

We understand that you're dealing with the same velocity of change that we're attempting to deal with here as well, but looking at the end results.... Lately, I've been reading about and getting my head around diagonal integration, which is another dimension, I guess, so if I look a bit befuddled....

Canada is unique in the world in that all the biggest TV services except CBC are owned by telecom operators. I think there's a tendency on behalf of many of us, perhaps, to think that this is a global issue and that we're just along for the ride like everybody else, but we have gone from 19th in 2004 for media concentration—vertical integration, cross-media ownership—to third in 2009. As you mentioned, with Shaw's Global takeover and then Bell's with CTV-Astral, we're now number one.

I guess we can get into conjecture, but certainly, if you want to get into consumer choice or obviously things that are not really within your bailiwick, such as editorial content, that's extraordinary. We're number one. That's not somewhere you wanted to go if you're the Competition Bureau, is it?

[Julien Brazeau]

From a competition perspective, obviously, the more competitors that are in the marketplace, usually the better it is, because that leads to greater product choice, lower prices, and things like that.

As I said, we do take a look at concentration, but at the same time, just the fact that an industry is concentrated.... We have to look at the specific marketing question as well, at how we're defining the market and what the product is that we're taking a look at, even though there is perceived to be a lot of market concentration. In the context of Postmedia specifically, we saw, on the advertising side at least, that there were dollars being reserved for print media versus dollars reserved for digital media.

All that is to say, I guess, that the level of concentration itself is not necessarily an indication of anti-competitive conduct in the marketplace, but again, it's something that we look at closely.

[Anthony Durocher]

To add to that response, it's also something that the CRTC examined. My understanding is that they have a vertical integration framework to deal with behavioural aspects of how vertically integrated media companies can utilize their assets. Also, I think what you would hear from the industry is that this, too, is an evolving ecosystem, with greater numbers of people cutting their cords and adopting Netflix for their needs as well.

The overall climate of competition in an industry is something that we stay on top of as well. I think our colleagues at the CRTC are very much on top of it as well.

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

I understand that. Going by the 2008 diversity of voices policy, let's say for the TV market, if there's a single owner that afterwards would end up with less than 35% of the total market share, then it gets the green light. At 35% to 45%, they'll review it. At over 45%, it's rejected.

For yours, I think you're more subtle, as I understand it. You're looking at relative changes and concentration. I just don't think that as the Competition Bureau this is necessarily where we want to be—the number one most-concentrated media ownership country in the world. It just doesn't seem to bode well for anybody.

You've told us about the things that you need to look at. I would make the argument, in fact, that we're less.... As difficult it is with job losses—and certainly we know many of these people and their colleagues—I think that what this means for lack of voice and for consumer competition, for a lack of diversity in voices in this country, is really quite shocking. Perhaps what we'll need to do is make recommendations that either the terms under which you review this marketplace are different or that this be taken to somebody else, perhaps, because the end results are not, I think, what we want. I'll leave that for your comment.

[Julien Brazeau]

I know the focus, obviously, is on this issue of diversity of voices. As I mentioned in my opening remarks, looking at the issue of diversity of voices traditionally falls outside the scope of the factors that the bureau looks at, which are advertising rates, readership, price and outputs, things that are easily quantifiable.

As for whether the bureau should be enabled with powers to take a look at those things, I think if you look generally internationally at some of our partners like the U.S. and the U.K., their approaches are similar to those of Canada, whereby their competition authorities are mandated with doing more of an economic concentration review, and their broadcast regulator takes a look at this issue of diversity of voices.

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

Except their concentration levels aren't nearly what ours are....

[Julien Brazeau]

I understand that. I think just with regard to that issue of diversity of voices and whether the bureau should opine on it and whether that power should lie with the bureau, the bureau definitely enforces the act that it is given. Obviously we report through the Department of Innovation, Science and Economic Development, and I think that question would fall better to them, given that they are the policy lead for the issue of competition policy. But certainly, if Parliament decided that those powers would lie with the bureau, the bureau would administer the act we were told to administer.

[The Chair, Liberal, Hedy Fry]

Thank you very much.

We go now to Mr. Waugh for the Conservatives.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Thank you.

It's good to see you both again.

We did bring up the sale of the National Post to the Sun, and the issue of all the editorial decisions being made in one room, but supposedly, were too different. We did talk about Bell and Astral, and so on. We've seen a lot of the bigger newspapers swallow up the medium or low ones in small cities, and then all of a sudden, when things are bad in that market, they just throw that away.

What are your thoughts on that and what you have seen? There is nobody lining up to do a newspaper in any city in this country right now. We've seen the charts here for the last year. There is no competition, because who the hell wants to buy a newspaper other than the National Post?

Do you want to buy one? No, nobody wants to buy them. It's a dying breed. Just look—every day, it doesn't matter if it's Guelph or Nanaimo or wherever, right? Eventually there will be no work for you because there'll be no newspapers. I'm serious on this.

As the Competition Bureau, have you changed the way you look at it? Do your guys go back every five years? What is the procedure if you do that?

[Julien Brazeau]

I'll let Anthony talk a bit more about how we define product markets and what we take a look at, but we don't actively, I would say, monitor specific industries, because our law is general application law. We take a look at cases when they come through the door and we do a thorough investigation based on the facts that are given to us, but we don't actively monitor on an ongoing basis.

That being said, as I mentioned, in the context of a merger, to the extent that we've authorized a transaction or provided a “no action” letter, there's a 12-month period in which the bureau could decide nonetheless to review, but there would have to be material information that would suggest that the analysis or the competition analysis has changed or that there are new facts that we weren't aware of at the time of our review to get us to reopen a transaction.

That being said, I'll let Anthony speak to how we define specific markets and what we determine to be competitors or not be competitors in a given case.

[Anthony Durocher]

Maybe I'll put it in some context. The Competition Act is a law of general application. We look at mergers in every industry you can imagine under the sun. In a given year, we would review anywhere from 200 to 250 mergers. Every single one of those cases is evaluated based on the facts and evidence we get from the marketplace. For any given merger review, we would interview all sorts of relevant stakeholders, review internal company business records, and when required, look at the data to inform our decision.

With respect to the newspaper industry in particular, like a lot of other industries in Canada, it has evolved. You're right. Market forces are such that companies need to innovate and change. Consumers' habits are changing as well, and we're seeing shifts. I can tell you that, at the bureau, we try to stay on top of those changes as much as we possibly can so that every single one of our merger reviews is well informed as to where the market is now and where it could be headed in the future.

Changing consumer habits are something that impacts a lot of industries outside of newspapers as well. The best we can do is make the most informed decision we can at that point in time regarding the competitive impact of a merger. A large part of that involves defining the relevant markets as well, which enables us to calculate market shares. Under the law, we cannot challenge a merger on market shares alone. We have to look at barriers to entry, the nature of effective remaining competition, and the nature of change and innovation in the marketplace, and ultimately come to a landing with respect to a merger of whether it substantially lessens or prevents competition. Our mandate is to look at a merger, answer that question, and react accordingly.

The newspaper industry is one where we've had recent experience reviewing transactions, and I think we are very mindful of the changing nature of the marketplace.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

When we talk about Facebook.... We all see the graphs of everyone switching to Facebook. How does it affect the Competition Bureau? They come here today and talk about a journalism project, yet they have not hired one journalism student, or anyone at all. They just take their information from other providers. Is it your job, as a Competition Bureau...?

We're seeing Facebook being the face of news in this country, if not right now, certainly within the next 12 months. They've just about caught up to television, and they've surpassed newspapers. Who regulates that? How do we deal with Facebook when we see what we have seen in this country, especially in the last 18 months?

[Julien Brazeau]

We certainly don't regulate Facebook. The bureau itself is not a regulator, nor does it have any adjudicative powers. That being said, I agree that the industry is evolving quickly. To the extent that there is a transaction to be proposed in this sector, we would definitely look at who the competitors are now in that sector. To the extent that the product market, in particular, has Facebook as a competitor—whether it be Facebook or Google—we would certainly consider the impact it is having on a specific marketplace and determine its role in the competition in that sector.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

I would say that they have a huge impact in this country right now. What can you do about it?

[Julien Brazeau]

Absent an actual transaction or specific anti-competitive conduct by the parties, the bureau wouldn't go about regulating Facebook in terms of its activities. Again, we're not a regulator of businesses. We enforce the Competition Act to ensure that businesses don't engage in anti-competitive conduct. To the extent that there is evidence that any party would engage in anti-competitive conduct, obviously we would investigate that fully and determine whether remedies are needed.

[The Chair, Liberal, Hedy Fry]

Thank you.

Now I'll go to Mr. Nantel.