Industry Committee on June 10th, 2024

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you for that very detailed answer.

I'm going to switch to structural presumptions and ask Mr. Iacobucci and Mr. Ross a question about that. I think they made some really good comments.

I understand that Bill C-56 repealed the efficiencies exception. However, the tribunal can still consider whatever factors it deems relevant under the merger review. In essence, it can still consider efficiencies. I think both of your statements were that reintroducing elements of efficiencies into the statute would be problematic.

Have I misunderstood that, Mr. Iacobucci?

[Edward Iacobucci]

I didn't mean to speak about the efficiencies treatment in Bill C-352. I think Professor Ross did. However, perhaps I could, quickly, start with this. I agree with the concerns about the wording we see for the efficiencies factor that's reproducing the efficiencies defence. It could lead to issues, especially given the Tervita case, which you're all familiar with. I agree with that.

I'm less concerned—and maybe this is what your question is getting at—about whether efficiency is explicitly listed as a section 93 factor, partly because it's quite a different kind of consideration. All the other considerations in section 93 go to the kinds of competitive conditions in the market. You could have, as the old efficiencies defence suggests, a merger that is both efficient—it produces efficiencies—and quite anti-competitive. They move in different directions. It's unlike the number of competitors: The more there are, the more you tend to think there's more competition, all things equal. Introducing efficiency as a factor is a bit like a fish out of water or a square peg in a round hole—take your tortured metaphor. It doesn't quite fit there.

To get back to your question, Mr. Turnbull, efficiencies will get there in the sense that the merging parties need a theory of their case as a strategic matter, as a tactical matter, so they'll have some story about how they're doing this not because of competition but because of efficiency. I'm not sure that's something the tribunal needs to consider. The burden is on the bureau to show it's anti-competitive.

I would leave it at that. I think efficiencies might introduce confusion. That's my sense of things.

[Ryan Turnbull, Liberal, Whitby, ON]

I would have gone to you next, Mr. Ross, but I'm out of time.

[The Vice-Chair, Conservative, Rick Perkins]

You can in the next round, perhaps.

Thank you.

Mr. Garon, you have the floor for six minutes.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Thank you, Mr. Chair.

Please allow me to take a few seconds to acknowledge and thank all the witnesses for being here today to participate in this very interesting analysis.

I'll start with you, Mr. Ross. I'd like to talk about the 60% threshold related to combined market share. It seems to me that forcing competition authorities to prevent a merger or acquisition that would result in a combined market share of 60% or more would actually take away tools from the Competition Bureau to make a real assessment of the economic effects of a merger or acquisition, for example.

Last week, I asked Mr. Singh if he had any examples of mergers or acquisitions that had led to a combined market share of over 60% and had been detrimental to consumers. Clearly, Mr. Singh had done a poor job on his bill, since he had no examples to provide to me.

For my part, I have some questions, particularly about idle assets. There are assets for which we can allow mergers and acquisitions so that there is ultimately only one player in a market, without which there would probably be none, because we need to achieve an economy of scale. I know this has already happened in the case of cinemas, for example.

Also, I raised the question of regional quasi-monopolies. Think of grocery or hardware stores in remote areas, which can only survive if they have no competitors. This is what we call a natural monopoly.

On the other hand, I wonder how market share is defined. Canada is a country that goes from coast to coast and back again. Some companies are regional, while others are pan‑Canadian.

So I'm wondering, and I'm asking you, ultimately, if preventing mergers and acquisitions that would result in a combined market share of 60% or more might not cause detrimental effects for consumers, particularly those in remote communities?

[Prof. Thomas Ross]

I agree with everything you said.

For reasons that Professor Iacobucci articulated in his opening remarks, market definition is a very messy enterprise. Reasonable people can disagree about how to define the market, and once you've done that, you're going to get different answers about market share and concentration.

If you have a merger, what you should care about, as you have suggested, is the impact of that merger. How will the market be after the merger compared to what it would have been absent the merger? That information only comes from studying the merger and studying its competitive implications. Some hard-and-fast rule that says you can't merge when you get to a certain size and a certain market share runs the risk of blocking mergers that could be very efficient.

You have mentioned small geographic markets. That is a concern. Sometimes when we use the term “natural monopoly” our minds tend to go to great big firms that dominate their industries. In the old days, we used to think about the electric companies and the only telecommunications company we had. We thought of them as natural monopolies. However, in fact, there are many natural monopolies in small markets. The market is just not big enough to support more players. You might start with very large market shares, so you should allow the bureau and the tribunal, using discretion and giving the tribunal the authority to make decisions on this rather than ordering it to issue an order—

[Jean-Denis Garon, Bloc, Mirabel, QC]

Please allow me a follow-up question on this. In fact, I'm going to put my question to Ms. Quaid.

It seems to me that elsewhere in the world, there is a tendency to establish a framework within which competition authorities can work, determining their own tools to avoid the unintended consequences of very rigid criteria, as we tend to do in the Canadian framework. It's a preconception or an impression I have, but it seems to me that, in the Canadian framework, there's a tendency to always add very rigid criteria, which means that, in the end, the Competition Bureau is less effective in its analyses. It can equip itself with fewer of the new tools that appear in the scientific literature, which opens the door to numerous and very lengthy disputes in which, by virtue of this multitude of criteria, companies always end up with a case before the court. The competition authorities always end up winning to the detriment of the consumer, after very long delays.

Am I right in saying that we're constantly going in the wrong direction, using an approach whereby Parliament knows everything and the competition authorities must comply?

[Dr. Jennifer Quaid]

I'll try to answer this question briefly, because I know you don't have much time.

A priori, there's also an approach establishing a link between the legislative framework and the enforcement framework. I certainly have a vision that is inspired by my training in civil law. We start by implementing coherent principles. Later, there may be more detailed rules, but there is, in a way, a structural organization of rules.

I think that initially, when the law was created in 1986, legislators had an idea in mind and a common thread. We may agree or disagree, but I think over the years things have simply been added, mostly details. This style of drafting is fairly typical of common law countries. Instead of stating the general principle, we're afraid, so we make lists.

The problem is that, subsequently, the lists influence the way the general provision is interpreted.

[Jean-Denis Garon, Bloc, Mirabel, QC]

I would add that lists age badly.

[Dr. Jennifer Quaid]

That's right.

I want to add a comment on a subject that causes me disappointment, and I know I'm going to repeat myself a few times. I would say, a fortiori, that my disappointment stems from the fact that we didn't start by asking ourselves what we needed to foster a competitive economy in light of the realities of the 21st century. We should have had that discussion.

There are a host of little references to workers and work, for example, but no thought was given to whether this should be one of the aims of the law. Maybe it isn't, but no one raised the question. Little things were added here and there, and, in my opinion, this makes it more difficult to interpret the law consistently.

I tend to think we'd have a better fit between principles and implementation if we could separate these two elements, but that's a professor's dream. I know it won't happen.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you, Mr. Garon.

The next questioner is MP Masse for six minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair. It's good to see you.

I think there's a misunderstanding or lack of understanding about how a private member's bill takes place and the scope that a private member's bill can have. This is the way we got here. Basically, Bill C-19, Bill C-56 and Bill C-59 were pieces of government legislation that had various changes. Ironically, some of the changes we tried to get in the first set of laws are finally being included in Bill C-59—15 years later. However, many people came here from different institutions and spoke against those changes, quite frankly. When you go back and look at Hansard and the blues, there's been a consistent public outcry for improved competition laws, but there has not been consistency in academia and the private sector with regard to how to do so. That's been the challenge.

This bill is part of what a private member can do after being selected in a lottery system, but legislative issues have to be scoped. They can't include increased funding, taxation and a whole series of other things. Also, we're left with a bill that later on was eclipsed by another piece of legislation, which took some of the ideas of this bill. Here we are today trying to see whether we want to continue to increase competition laws for Canadians. This is the opportunity we have for amending parts of the bill to get some improvements that the Competition Bureau, the commissioner and many others continue to advocate for.

My first question, Mr. Hatfield, is on what you're hearing from the public. If we do not use this opportunity to at least make some improvements to the Competition Act, do you think Canadians would be disappointed? Although it has been raised that we need a more comprehensive process—even the Competition Bureau commissioner mentioned it—we still have tools available in front of us right now. With Parliament winding down, having a bill selected high enough in the Order Paper to try to squeak through in five years, if we last that long.... I'd like to know what your outreach can tell us about public confidence in institutions like the Competition Bureau.

[Matthew Hatfield]

I think many people in the public don't know about the Competition Bureau, because the bureau has had very few opportunities to score triumphs that get them in the public eye. Many people know that they opposed Roger-Shaw, but that didn't work out.

When we look at how competition law has played out to date, it has very deeply hamstrung the bureau's ability to function. At the end of Bill C-59, but also with some of Bill C-352's ideas, it would be healthy to see some interpretive flexibility and scope for the bureau to do things like assess market definitions in a way they think makes the most sense for Canadian consumers.

In terms of the threshold question we were just discussing, it could be in the legislation or we could amend the legislation to establish a principle that would imply what the guidelines should be on that threshold. However, I think there's a signatory effect of saying that you better have a really strong case if you think you'll get a merger above a 60% threshold, which peer review does accomplish. I worry less that small businesses and small towns would be caught up by that, because the bureau could just look at the market in different ways to make sure they aren't hurting folks in those very specific circumstances.

[Brian Masse, NDP, Windsor West, ON]

Mr. Bester, can you speak to the bright line merger rule of 60% and the issue over structural presumptions? Superior Propane is one example, but there are other ones out there, especially in the telecom industry, as we've seen. Perhaps you can enlighten us on the need to at least go in a direction that's less defensive. In the Rogers-Shaw situation, the Competition Tribunal asked for damages from the competition commissioner to go to Rogers, costing Canadians millions of dollars, after it fought to have the merger, which many of us were opposed to. It was more like a takeover, really. Perhaps you can enlighten us on that.

[Keldon Bester]

You're highlighting a good point. The structural presumptions are a response to the bias against intervention and against the bureau blocking mergers, which has persisted over the past four decades, since the introduction of the Competition Act. To refer to some analysis, of the eight mergers challenged by the bureau, seven resulted in market shares above 60% and four of them in near or literal monopolies. Only two of them had any sort of remedy, and none of them were blocked. We think of the structural presumption as strengthening the position when the bureau decides to challenge a merger, rather than imposing a stricture on the Competition Bureau.

It's important to note that the bureau doesn't approve mergers; it makes the decision about whether or not to challenge a merger. The structural presumptions—the 30%, rising up to the 60% in extreme cases—are a way of rebalancing the foothold of the bureau when it seeks to challenge one of these mergers. Again, it's in response to the four decades of bias towards consolidation. That's most evident in the efficiencies defence, which was removed in C-56.

[Brian Masse, NDP, Windsor West, ON]

It's a bit of a change in philosophy, I suppose, in the sense that the public interest comes first versus being reactionary. You can tell me if that's a bad analysis, but it's where I see some of this going. We always seem to be in a reactionary mode with the Competition Bureau, as opposed to setting a precedent for what we should expect in the Canadian market to protect consumers.

[Keldon Bester]

I frame it as a move away from a belief that more consolidation is the way we need to go to advance economically and deliver benefits to Canadians. We've engaged in that experiment for four decades now, and I think across a number of markets, we're not pleased with the results. If there's a change in philosophy, I think it's about turning the page on that.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

Mr. Chair, do I have any time left? I can wait for my next round.

[The Vice-Chair, Conservative, Rick Perkins]

You've gone a little over, but that's okay.

That concludes the first round.

We'll begin the second round with MP Généreux.

Mr. Généreux, you have the floor for five minutes.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you, Mr. Chair.

I'd also like to thank all the witnesses.

I will render unto Caesar that which is Caesar's. This morning, I decided to ask my assistant, Ms. Aya El Farouk, to do something for me. By the way, she's here, right behind me. Ms. El Farouk is a new Canadian who studied at the University of Ottawa. Yesterday, she received her master's degree in criminology. I'm warning each and every one of you: Don't come and take her from me.

I'd like to take this opportunity to thank her for her work, and I'd also like to thank all the assistants, from all parties. We never, or hardly ever, highlight the effort and work they do to help us prepare for our meetings, among other things.

So, I asked my assistant to prepare the questions that follow.

Ms. Quaid, you expressed your disappointment with the competition laws and the government's failure to modernize them. Can legislative changes that still seem insufficient solve the competition problems facing Canadians?

These are questions for all the witnesses. Is legislative oversight alone enough? Is there anything else the government can do to create and promote competition in Canada?

Ms. Quaid, these questions are addressed to you, but I invite all witnesses to answer them as well, if they wish.

[Dr. Jennifer Quaid]

Thank you for your question. It goes to the heart of the matter and, what's more, it's very well formulated. I congratulate Ms. El Farouk on it.

In my other areas of expertise, I've already written that, precisely, to believe that a legislative reform ends with the adoption of a law is to see things backwards. In fact, a reform begins with the adoption of a law, but it must be accompanied by the necessary support to ensure that its implementation, interpretation and application will be respectful of what motivated the reform.

I think that here we are in the presence of a great willingness to undertake a reform of the Competition Act. However, I question the means we have taken. I'll say this for the last time: In my opinion, we should have started by asking ourselves what we wanted to achieve. Do we really have a law that is flexible enough and designed to adapt to the needs of the future in a rapidly changing world? The economy and the nature of human society are changing at a much greater pace than before. That's my perception.

On the other hand, and this is more pragmatic, we need to ensure that the authorities are vested with the power to enforce the act, which includes, of course, the Competition Bureau, but also the Public Prosecution Service of Canada, which enforces the criminal provisions. It's not the Competition Bureau that enforces these provisions. We need to ensure that we have the institutional resources to make decisions. Of course, this is a matter for the Competition Tribunal. With all due respect to the members who sit on that tribunal, I say it's not a functional tribunal, and I'd like to see something different, namely a tribunal that has more expertise and can act faster.

However, this doesn't just mean demanding that it be faster. We also need to have provisions that lighten the load, particularly when it comes to reversing the burden of proof. Even if I don't agree with relying solely on market share, I think it's a step forward to tell the party holding the information to provide the proof. I think that in this respect, these are good ideas.

Finally, we shouldn't forget the fact that a change of culture is also necessary. The Commissioner of Competition talks a lot about the need for a competition mentality in government. I'd say that beyond that, we need to look after competition, because it's part of the country's economic policy. So we need a cross-functional approach. We recently created the Canadian Digital Regulators Forum, which brings together the Competition Bureau, the Office of the Privacy Commissioner and the Canadian Radio-television and Telecommunications Commission, or CRTC. This will touch on data and artificial intelligence, and other issues, if you manage to complete your study. We can't stop there. I think we need to keep an eye on what comes next. The law is a start. I'll stop here.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

I invite other witnesses to speak, if they wish to do so.

Mr. Iacobucci, did you want to add any comments?

[Edward Iacobucci]

Thank you.

[Prof. Thomas Ross]

I'd be happy to add a couple of words on that. I agree with what Professor Quaid said. I also want to hearken back to what the commissioner said when he spoke to you.

As ambitious as this reform process has been with the number of changes that have come forward—many of them good—there may be a bit of a missed opportunity. As Professor Quaid said, we didn't really revisit the goals we're trying to achieve with this, which could make our efforts seem a bit muddled and disconnected from each other. We also didn't think very much about the institutions. I think Professor Quaid was hinting at that. Do we have the right system here or should we move to more of a commission administrative structure where decisions can come out more quickly, as other jurisdictions have?

As the commissioner himself said, if we really want to push competition in Canada, we need a “whole-of-government approach”. I know the commissioner told the committee this. We need all levels of government to get on board to change the way we regulate, control and protect certain industries and sectors.

He mentioned the Australian Productivity Commission. Something like that could be a very positive thing. That's been suggested for Canada before and has not happened. It's something that goes beyond competition policy. The Competition Act, the bureau and the tribunal just take care of one big slice of competition in Canada, not the whole pie, so I'm with the commissioner on our need for more of a whole-of-government approach.

[Edward Iacobucci]

I was just going to say that, but Tom said it better.

I'm thinking about the role of ownership restrictions, regulatory barriers to entry and internal trade. Free trade has been one of the greatest things for competition in Canada, but we still don't have it internally. There's supply management. There are a lot of things undermining competition in this country.

I will say this. What has been bold and coherent about the approach of the government to reforming the act has been to make enforcement stricter. A number of things have moved all in the same direction. Some other things could have made it even more coherent—I agree—but to understate the changes in the way things are going to be enforced would be a mistake. I think these changes have been coherent and positive.

The whole of government is the way to go.