Evidence of meeting #140 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was amendment.
A recording is available from Parliament.
Liberal
Ryan Turnbull Liberal Whitby, ON
Similarly, with respect to part (b), which is the part of the amendment that refers to trade secrets, do trade secrets need to be revealed to ensure genuine right to repair?
Director General, Strategy and Innovation Policy Sector, Department of Industry
On the issue of the trade secrets portion of the proposed amendment, there are some concerns that it could create some challenges. In the situation we're talking about here and with the way this is formulated, we understand it would essentially attempt to override existing intellectual property law to suggest that anything that is essential “diagnostic, maintenance, repair and calibration information” does not constitute a trade secret. This is something that could not necessarily be managed appropriately through the Competition Act, but rather in intellectual property law.
There are some concerns about blurring what constitutes the provision of information that enables a repair versus the trade secret that may be behind that. For example, think of a specific lubricant that is important for the repair and maintenance of a vehicle. The provision of or access to that product would be important for the diagnosis or repair work, but it would not be necessary, for example, to reveal the formulation of that lubricant, which could constitute the trade secret.
There is a concern around part (b) and what's being attempted there, which is essentially to suggest that a trade secret “does not include any essential diagnostic, maintenance, repair or....” There could be a bit of an unfortunate blurring there, which should be considered by the committee, for sure.
Liberal
Ryan Turnbull Liberal Whitby, ON
Just so I'm clear, what is the risk of trade secrets being revealed? Obviously, it would have some pretty significant impact on the companies that depend on those trade secrets.
Director General, Strategy and Innovation Policy Sector, Department of Industry
The concern with this scenario could be that a company feels emboldened to attempt to not provide some information. I think that's what this is attempting to get at—standing behind a trade secret as a reason for not providing the means for diagnosis or repair.
Our assessment is that the bureau and, of course, the tribunal would be able to manage it, see through it and distinguish between the provision of the means for diagnosis and repair versus the revealing of information that goes behind the product itself.
Liberal
Ryan Turnbull Liberal Whitby, ON
With that testimony, I'd like to suggest a subamendment. Hopefully, my colleagues Mr. Davies and Mr. Ste-Marie may find it amenable. It's the deletion of the portion that deals with trade secrets.
I can read it into the record if you like, Chair.
It's to delete the following from BQ-4:
(b) by adding after line 24 on page 438 the following:
trade secret does not include any essential diagnostic, maintenance, repair or calibration information.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you, Mr. Chair.
Industry stakeholders tell us that suppliers and producers of products all too often hide behind industrial secrecy to block repairability rights. However, I understand the information officials gave Mr. Turnbull. If we keep part (a) of the amendment, it will allow for repairability without requiring disclosure of trade secrets. Disclosure of trade secrets is not the objective of the amendment. So if it suits all my colleagues, I'm quite comfortable supporting the proposed subamendment.
Liberal
The Chair Liberal Peter Fonseca
Thank you.
We'll go to the subamendment. Are we supportive of the subamendment?
Liberal
The Chair Liberal Peter Fonseca
(Subamendment agreed to on division)
(Amendment as amended agreed to on division [See Minutes of Proceedings])
Since BQ-4 has been moved and voted on, NDP-11 cannot be moved, as they are identical.
(Clause 244 agreed to on division)
(Clauses 245 to 248 inclusive agreed to on division)
(On clause 249)
Liberal
The Chair Liberal Peter Fonseca
On clause 249, we have NDP-12.
MP Davies, would you like to move this?
Don Davies NDP Vancouver Kingsway, BC
I will, Mr. Chair. I'll speak briefly and have this go to a vote.
It amends clause 249 of the bill to stipulate “that the purpose of an order made against an anti-competitive merger is to preserve or restore the level of competition that would have prevailed without the merger.”
As currently drafted:
Bill C-59 does not address the standard for merger remedies under the [Competition] Act, which remains weak by international standards. Specifically, the Supreme Court of Canada has held that remedies for anti-competitive mergers need only “restore competition to the point at which it can no longer be said to be substantially less than it was before the merger” and, moreover, that we should favour the “least intrusive” remedy that meets this standard.
As well, Mr Chair:
The emphasis, therefore, is on finding a remedy that makes the harm from anti-competitive mergers less bad, or more tolerable, rather than preserving the state of competition. And even then, the Tribunal has discretion not to order a remedy at all—section 92 only says the Tribunal “may” make various orders if it finds that a merger is anti-competitive.
As explained in the [Competition] Bureau's February 2022 and March 2023 submissions, most jurisdictions seek remedies that fully prevent the harm from anti-competitive mergers. This makes sense [to us, given that] anti-competitive mergers generally occur in concentrated markets where there is limited competition and little prospect of new entry in the future such that the effective markets are unlikely to 'self-correct'.
I'll end by further quoting the Competition Bureau. In March 2024, when they wrote this committee, they said:
Merger control should seek to preserve the level of competition in these markets as much as possible rather than allow it to be eroded through anti-competitive consolidation that is only partially remedied.
Accordingly, we recommend that Clause 249 be amended to provide that the purpose of merger remedies ordered under [section] 92 is to preserve or restore the level of competition that would have existed without the merger, consistent with international best practice.
That's exactly what our amendment would do.
Liberal
Ryan Turnbull Liberal Whitby, ON
I think this is one of the rare times that we may disagree with both the NDP and the Competition Bureau or the commissioner.
I want to ask the officials to explain how the current requirements for merger remedies in Canada compare to the requirements in the U.S. and Europe.
Senior Director, Corporate, Insolvency and Competition Directorate, Department of Industry
I'm happy to try to do this.
For the consideration of the committee, the way the act currently works is a test—it's a substantial lessening or prevention of competition. The system in Canada is merger as of right, so to speak, unless the commissioner challenges a merger. The threshold to successfully challenge a merger in Canada is the substantial lessening of competition.
What the court has said is this. Let's say a merger is above that threshold and is challenged. When it comes time to decide the remedies, we need to bring the merger back to below the substantial lessening of competition threshold.
Comparing with other countries is always a bit challenging, because countries have different structures and regimes. One consideration is that even though this threshold may vary in countries, we understand that it's always in parallel, so that the threshold to challenge a merger and what the remedies should achieve are always equivalent.
In the U.S., the heads of the FTC and the DOJ actually contributed to the public consultation that the government ran last year. In their submission to the government, they said:
When analyzing a potential remedy, the courts and agencies focus on whether the proposed remedy would “eliminate the effects of the acquisition offensive to the statute.”
The idea of the remedy is to make sure that the merger no longer offends the statute and so is not against the law, as it currently is.
I think it's important to also understand that in Europe, the European Commission is both the commissioner of competition and the tribunal of competition. It is the decider of first instance. It is the same entity for what arises as a merger and deciding on the remedy.
Again, we understand that the threshold is the same. A potential challenge, but maybe not an unsurmountable one, in the Canadian context would be that if a merger substantially lessens competition, it can be challenged, but once it's been challenged, the remedy has to be zero impact on competition, not substantially less.
You have two different things. If you're able to fly under the radar, so to speak, you're able to be under the “substantial lessening” threshold, but if you get challenged, then the remedies are stronger.
There's a bit of a principle question and maybe a practical one, too. If the remedies are bringing parties lower than what would authorize the commissioner to challenge, why wouldn't they just disband a merger and refile a separate one that's just under the threshold? Then the commissioner would have no possibility to intervene.
Liberal
Ryan Turnbull Liberal Whitby, ON
To clarify, you're saying that it would create a real inconsistency in terms of the threshold that you have to meet in order to challenge a merger. The remedy would be substantially different; it wouldn't follow the “substantially lessen or prevent competition” test—the SLPC.
Is that correct? It creates a fundamental inconsistency.
Senior Director, Corporate, Insolvency and Competition Directorate, Department of Industry
That's correct. It would be a new “zero impact on competition” test, with the remedy. That's how I understand it.
Liberal
Ryan Turnbull Liberal Whitby, ON
What is the purpose of a remedy? Let's just get to a very basic thing here. The purpose of a remedy is to...?
Senior Director, Corporate, Insolvency and Competition Directorate, Department of Industry
The Supreme Court has said that the purpose of a remedy is to make sure that the merger does not substantially lessen or prevent competition. The merger is brought back into a situation where it could not be challenged.
Liberal
Ryan Turnbull Liberal Whitby, ON
The Supreme Court has asked for consistency, then, in using the same test in the remedy as in the merger challenge itself.
Senior Director, Corporate, Insolvency and Competition Directorate, Department of Industry
Asking for consistency is maybe not the way I would frame it.
You asked what a remedy should do. As interpreted, the remedy should make sure that the merger no longer substantially lessens or prevents competition.
Liberal
Ryan Turnbull Liberal Whitby, ON
What you've said, in terms of what this amendment contemplates or proposes, is that you would see no change to competition at all, rather than a remedy mitigating the risk of substantially lessening or preventing competition.
Is that correct?
Senior Director, Corporate, Insolvency and Competition Directorate, Department of Industry
That is my understanding of the commissioner's proposal and the proposed amendment.
Liberal
Ryan Turnbull Liberal Whitby, ON
That's not necessarily consistent with other jurisdictions. I think you have said that, but can you just again...? Because this is such a technical change, I think it's really hard to understand the difference between no change to competition versus potentially substantially less, or preventing competition, because what you're saying is that the threshold set for the remedy would be much lower than what it is for the challenge, in the current amendment. Is that right?
Senior Director, Corporate, Insolvency and Competition Directorate, Department of Industry
Much lower is not how I would put it. The substantial lessening of competition is what has been established by case law. Our understanding of it is that it's not supposed to be a significant impact on the competition. It's not supposed to be substantial.
I wouldn't say that the threshold's much lower, but it is lower. I think the proposal is to have no impact on competition. It's a matter of degree.
It's also, or it should be in any case, a bit of a dynamic standard insofar as two small companies that merge to a 5% market share, for example, are not potentially lessening competition even if the 5% market share is changing. However, let's say a company that is at 50% acquires a 5%; that can be a substantial lessening of competition.
It's a contextual standard. There are a lot of criteria in the act to determine if it's substantial. Yes, there would be a difference introduced.