Industry Committee on June 10th, 2024

[The Vice-Chair, Conservative, Rick Perkins]

Welcome. I call the meeting to order. This is meeting 129 of the House of Commons Standing Committee on Industry and Technology.

I am your substitute chair for the next couple of meetings. One way to keep me quiet is to put me in the chair's spot.

[Some hon. members]

Oh, oh!

[The Vice-Chair, Conservative, Rick Perkins]

Today's meeting is taking place in a hybrid format, pursuant to the Standing Orders.

Pursuant to the order of reference of Wednesday, February 7, the committee is resuming consideration of Bill C-352, an act to amend the Competition Act and the Competition Tribunal Act.

I'm not going to read all the bumf about the earpieces, but I encourage everyone, if they're not using them, to keep them down by the sticker so that we avoid the feedback and ear damage the interpreters can get. I appreciate everyone's co-operation.

With that, I welcome the witnesses for today, and I congratulate our clerk on becoming a grandmother yesterday—again.

[The Clerk of the Committee, Ms. Miriam Burke]

It's not again. It's the first time.

[The Vice-Chair, Conservative, Rick Perkins]

It's the first time. That's even more important.

As for our witnesses today, we have Edward Iacobucci, professor and Toronto Stock Exchange chair in capital markets in the faculty of law at my alma mater, U of T. I didn't go to law school there; I was just an undergrad. We have Jennifer Quaid, associate professor and vice-dean, research, civil law section in the faculty of law at the University of Ottawa. We have Thomas Ross, professor emeritus at the Sauder School of Business, UBC, who's on video conference. From the Canadian Anti-Monopoly Project, we have Keldon Bester, the executive director. Finally, from OpenMedia, we have Matthew Hatfield, the executive director.

Thank you all for coming.

All sound tests have been done, and all witnesses appearing remotely seem to be successfully logged in.

I'll turn it over to our first witness, Dr. Iacobucci, for five minutes.

[Edward Iacobucci, Professor and Toronto Stock Exchange Chair in Capital Markets, Faculty of Law, University of Toronto, As an Individual]

Thank you for the invitation to speak with you today about this bill.

As everybody here knows, some of the proposals in the bill are already law and other versions are in other bills. Some of what's been passed already I have some hesitations about. Maybe I'll close with a couple of observations there, but I'll focus my remarks on the things that I think are still in play in this bill.

One thing it proposes is defining the financial penalties associated with cartelizing or conspiracy under section 45, which includes the possibility of fines up to 10% of the worldwide revenues of a firm convicted of price-fixing. My general approach to competition law reform in the last couple of years has been to support things that improve enforcement of the law—that is, stricter enforcement of good substantive law is welcome. I was supportive when the government increased the bureau's budget. I've been pleased with the expansion of private rights of action, including, importantly, the possibility of damages for private litigants. Increasing administrative monetary penalties also, in my view, has been a positive development. Greater financial penalties and damages and increased deterrence of anti-competitive conduct, in general, will improve competition law enforcement.

Especially in this area, when it comes to price-fixing cartels, which are quite difficult to detect, I'm a supporter of strict penalties for price-fixing—that kind of offence. I therefore tend to support what's in Bill C-352 for that. It defines these penalties in a way that is trying to encourage them to be higher than perhaps they've been in the past. It authorizes stiff penalties for that kind of conduct and I'm supportive of it.

As to the second topic I want to talk about, I'm a little less supportive of what's in the bill. It concerns the emphasis on market structures in evaluating mergers. In my view, it's not a good idea to put into the statute market share thresholds for evaluating mergers. There are two basic reasons why I'm reluctant to support that kind of move.

First, market shares are inevitably imprecise. They're not tightly connected to competitive outcomes in any given case. On the first point, it's not that markets have some sort of objective truth to them such that analysts can sweep away the dust and see the contours of a market. Rather, markets are crude heuristics that roughly capture the sources of competition. In the case of a merger, it's about the sources of competition on the merging parties. There will often be alternative, entirely defensible definitions of the market that could lead to very different market share calculations. There's inevitably a kind of arbitrariness to market definition and, consequentially, market shares.

How does one measure output? Do we measure revenues? Do we measure units sold? Do we measure capacity? When measuring output, over what time frame do we measure it—last year's numbers, last week's numbers, three months or the last decade? Importantly, how close a substitute do two products have to be to be included in the same market? Are Coke and Pepsi, Coke and ginger ale, or Coke and beer in the same market? There's no right answer to those questions. It's a question of judgment. They could even vary case to case.

Second, market definition does not fully account for intramarket product differentiation. Two firms could have very similar products and compete quite vigorously within a market, while two other firms may be defined in the same market, but their products are differentiated in a way that suggests they don't compete quite as vigorously. The kind of binary, in-or-out nature of market definition at least has the potential to be a bit misleading. There's no correct way to define the market. There's therefore no correct way to define market shares.

Moreover, setting aside the messiness of market definitions and market shares, concentrated structure, just as a conceptual matter, does not necessarily imply weak, competitive performance. Causation, for example, could run the other way. You could have intense competition, especially in a market where there are scale economies. You could have intense competition weeding out weaker suppliers and leading to more concentration. It's not that concentration is lessening competition; it's that competition may be lessening concentration. Existing market shares may not predict the future. There may be very low barriers to entry, for example. A concentrated market may not necessarily pose competition concerns. A firm may have a large market share now but a relatively weak product in the face of innovation, so predictably it will be less important over time.

For all these reasons, I think market structure, as I said earlier, is a useful heuristic when evaluating mergers. It's a good tool to look at when evaluating mergers. I support what the bureau has done historically. They have put out guidelines that rely in part on market share just to give the public a sense of the likely approach of the bureau to a particular merger. However, putting market shares in the statute gives them a kind of legal significance and potentially a pivotal legal significance—certainly Bill C-352 does—that in my view is misplaced.

I'll conclude my time by identifying two elements of Bill C-352 that have already passed that I have some hesitations about. One is calling excessive and unfair prices an anti-competitive act. I have a concern about that. For one thing, high prices don't undermine competition. They're not anti-competitive in and of themselves. Second, it is going to be very difficult to know what excessive and unfair is going to mean.

The other concern I have is that, as a consequence of, frankly, our case law, the latest statutory amendment to take out the competition test for finding an abuse potentially catches conduct that is harmful to competitors but is good for competition and good for consumers. I'm a little worried that abuse has become a little too easy to establish as a consequence of those changes.

I will stop there. Thank you.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you very much.

Professor Quaid is next.

[Dr. Jennifer Quaid, Associate Professor and Vice-Dean Research, Civil Law Section, Faculty of Law, University of Ottawa, As an Individual]

Thank you to the members of the committee for this invitation.

Testifying before you is always a pleasure, especially when it comes to competition law.

However, I won't hide from you that I was surprised to learn that the committee had decided to study Bill C‑352, tabled by Mr. Jagmeet Singh in September 2023, since most of the provisions of this bill have been incorporated, in one way or another, into the bills tabled by the government, namely Bill C‑56 and Bill C‑59.

It is for this reason, and to better understand his concerns, that I listened carefully to Mr. Singh's testimony before this committee on June 3. It seems that three aspects of the Competition Act are of concern to him, as he makes three main proposals.

First, clauses 3 and 4 of the bill would modify the penalty imposed on those convicted under section 45 of the act. Second, clauses 8 and 9, which my colleague Professor Iacobucci has just discussed at length, deal with so-called “structural” presumptions linked to market share. Finally, the third proposal, and the least important, is to add, by means of clauses 7 and 10 of the bill, provisions to sections 90.1 and 93 of the act that take the wording of the exception provided for in cases of efficiency gains and place it instead in the main provision on the factors to be considered in assessing anti-competitive effects.

In this statement, I will focus briefly on the positive aspects of these changes and close with two remarks of a general nature on the competition reform process.

On clauses 3 and 4, I must confess that I am puzzled. In 2022, the Competition Act was amended to remove the previous $25-million cap on fines under section 45. This brought section 45 in line with section 47, which is the bid-rigging provision. It ensures that courts have maximum flexibility to set fines at levels that are proportionate in the circumstances to the gravity of the offence and the blameworthiness of the conduct.

Mr. Singh wants to reimpose an upper limit on fines. The previous $25 million would be reinstated, but then proposed subsection 45(2) would allow for an alternative, scalable penalty based on either three times the value of the benefit derived or, if that can't be calculated, up to 10% of the person's annual worldwide revenues. The objective is to communicate to courts the importance of imposing a quantum of fine that has enough bite to have an impact on the offender.

While I understand Mr. Singh's motivations, the modifications proposed will not produce the outcome he seeks and are likely to be counterproductive. The proposal is based on a misunderstanding of how criminal sentencing works in Canada, particularly the purpose of maximum sentences and how fines are calculated in cases of economic crime involving business organizations. I've done a lot of research in this area, so I'm happy to take questions on this. I would urge you to reject clause 3.

As for clause 4, I don't have any objection to it, but the provision—section 49 on financial institutions—has never been applied. I wonder why you wouldn't just have a fine at the discretion of the court given the size of financial institutions, relatively speaking, rather than having a $25-million maximum.

On clauses 7 and 10, I will say two things. I agree with the commissioner that reviving the old phrasing of the efficiencies defence may indirectly import back into the law some of the legal interpretations that came with that defence, such as an undue emphasis, in my opinion, on quantification and a judicial preference for a total surplus standard when assessing whether efficiencies are pro-competitive. However, I disagree with the commissioner that relying on the so-called basket clause, paragraph 93(h), is the best way to ensure that going forward, how we evaluate pro-competitive effects and how they're factored into merger law evolve in a manner consistent with the expectations that were created by the repeal of the efficiencies defence. I think this is an example of where enforcement guidance is going to be essential.

With regard to clauses 8 and 9, you have the benefit of two fine economic minds here, Professor Iacobucci and Professor Ross. They are better positioned than I am to speak to the frailties of relying on market share data alone as an indication of market power. I will simply echo the comments of my colleague from the Université de Montréal, Pierre Larouche—who appeared before you last week—that market shares are an incomplete picture and they can both overstate and understate market power. Bill C-59 also includes structural presumptions, but they are based on different measures than just market share.

This brings me to my final two points.

The first is that the debate over clauses 8 and 9 underscores a more fundamental problem, and it's one that Professor Larouche already talked about. I won't have time to get into detail here, but on the debate about what measures to put in the act, to me, they're secondary to whether or not we should have an act full of these kinds of details. There is a real problem with how the act is designed. I am a bit disappointed, I must confess, that this reform process didn't give an opportunity to start over with some basic general principles and develop a law that is far more rationally coherent and not with so many details and provisions from all over the place. Unfortunately, that's not what happened.

The final thing I want to say is that I hold out hope, but it's not going to happen this time around, that.... We still haven't really answered the fundamental question: What are we trying to do when we promote competition? We've skipped over the first question, which is, why are we doing this? That would inform the remedies we want, the choices we make, the emphasis we might put on different parts of law or what kinds of considerations would be relevant. Any discussion of the purpose clause ended with the Wetston consultation. Professor Iacobucci actually wrote about it. After that, there really wasn't much else there. There is no agreement on it, but I think it's an opportunity lost.

I'll stop there, but I welcome your questions in both official languages.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you very much.

Professor Ross, if you're available, you have five minutes.

[Professor Thomas Ross, Professor Emeritus, Sauder School of Business, University of British Columbia, As an Individual]

Thank you to the committee for this invitation to appear before you to talk about something that I care a lot about, which is Canadian competition policy.

I am an economist and professor emeritus at the Sauder School of Business. I've been working, studying, researching and teaching in the area of competition policy for about 40 years. I spent a year as the T.D. MacDonald chair of industrial economics at the Competition Bureau and have worked with the bureau on and off over the years since.

This is a very exciting time to be involved in competition policy in Canada. I can't remember a time quite like this, except maybe the mid-1980s when we got the Competition Act. We were prepared to look at so many different changes. There's a lot that I like about what has happened and some that has given me pause.

In my remarks, I want to focus on a couple of things. I'm going to echo a lot of the comments made by my colleagues Professor Iacobucci and Professor Quaid, but perhaps coming from an economist, it will have a bit of a different spin to it.

I want to focus on two areas—and I'm going to use the same language Professor Iacobucci used—that I think might still be in play to some extent given that many things seem to be more or less settled. I want to start with the structural presumptions from clauses 8 and 9. I'll talk mostly about mergers; that's really where they bite.

I like the idea of providing structural guidance to merging parties that is based on market structure, but like Professor Iacobucci, I think they belong in guidelines. To put them in the law gives them weight and suggests a false precision that I think could be counterproductive. It risks turning, if you go to a litigated matter, a dispute that should be about effects on competition into a debate about what the market definition is.

Economists are even retreating a bit from the whole market definition exercise because we realize, for reasons Professor Iacobucci gave, that it's very messy and very imprecise, and we don't think people should rely on it too much. If you want to measure market shares or concentration, you have to start with a market definition: What's in? What's out? How do you measure shares? Professor Iacobucci did a good job referring to those challenges. I would like them in the guidelines.

I have two recommendations about this. The first would be to put them in the guidelines and not in the law. If they are in the guidelines, all the presumptions, in my view, should be rebuttable. Bill C-352, which takes away the rebuttable feature for mergers above 60%, is problematic in my view. There are going to be mergers where you invoke the greater than 60% share, and the tribunal would not even have discretion, as I read this clause.

There are many circumstances in which a merger with 60% could actually be pro-efficiency and benefit consumers. You could think about a situation where a large firm is buying a small firm that was otherwise about to go out of business—a failing firm, as we might say—or two firms might merge that have zero overlap in their businesses, which I think is an example Professor Iacobucci gave. You would expect no competitive impact from that. If I'm understanding it correctly, it could even block a large firm from divesting some of its assets and businesses because it would still cross 60%, even though it's actually reducing its size. That's subject to interpretation, I suppose, but for those reasons, I'd be very concerned about structural presumptions in the law.

The other area I wanted to mention, which Professor Quaid also pointed to, is efficiencies as a factor. Here, again, it's mergers that I'm going to focus on mostly, although it does come up in the competitor collaborations area.

I was always a fan of having efficiencies considered in a merger review. I'm a little disappointed that it got pulled out, but I recognize the challenges it has presented. I would really like to see some recognition of efficiencies left in the law, however. For that reason, I'm happy that Bill C-352 leaves them in as a factor. However, I'm also with Professor Quaid, and the commissioner to some extent, on the fact that the way they're left in as a section 93 factor with a lot of the old language—for example, the “greater than” and “offset” language—could be somewhat problematic. It could bring back some old challenges with the old defence, and they could plague us again.

My preference is to have efficiencies recognized in some way. I worry that if they're not in there somewhere, the tribunal will think that Parliament took out efficiencies as a consideration; it was suggested that they make it a factor, and they chose not to do it. They might wonder how much weight they as a tribunal should put on efficiencies. We recognize that efficiencies are a prime motivator of many mergers and a prime impact of many mergers. When they come through, they improve things for consumers and the firm. I applaud the fact that Bill C-352 still recognizes efficiencies, but we might want to think about the way they do that.

I'll leave my opening remarks there. I'm happy to engage in any other elements of the bill.

Thank you.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you very much, Professor.

Our next presenter is Mr. Bester from the Canadian Anti-Monopoly Project.

Mr. Bester, please go ahead.

[Keldon Bester, Executive Director, Canadian Anti-Monopoly Project]

Thank you to the committee for inviting me to speak with you today.

My name is Keldon Bester, and I'm the executive director of CAMP, a think tank dedicated to addressing the issues of monopoly power and building a more democratic economy in Canada.

We appreciate the opportunity to appear before this committee to discuss the proposed amendments to Canada's competition law contained in Bill C-352. After nearly four decades of proconsolidation law, Canada is turning the corner on competition policy. With the passage of Bill C-56 last year, Bill C-59 being studied in the Senate and Bill C-352 being studied by this committee, this government and, in fact, all parties have made much-needed improvements to Canada's competition law.

Canada is on track to having a tougher stance against harmful takeovers, abuses of corporate power and practices designed to deceive consumers. These changes should be understood as the first step—echoing the comments of Professor Quaid—in rebalancing the relationship between dominant corporations and Canadian consumers, workers and entrepreneurs. The work of improving competition in Canada is really just beginning, and I want to take the opportunity to zoom out on some of the mechanics that might make that possible.

As important as strong laws are, just as important is the effective execution of those laws to the benefit of Canadians. The Competition Bureau is putting powers gained through Bill C-56 to work in investigating the use of property controls in the grocery sector. Along with the recently opened market study in the airline sector, also the result of Bill C-56, the investigation is an early sign that the Competition Bureau understands that its efforts need to be focused where competition matters the most to Canadians. These efforts raise an important point for the future of Canada's competition law: the need for a quick resolution of competition issues and greater transparency in the work of the Competition Bureau.

Our strengthened laws cannot help Canadians unless they quickly address practices that harm competition. Today, competition law investigations are a multi-year process. The ongoing investigation into Google's practices in the digital advertising market has been expanded after four years, with no timeline for the conclusion of the expanded investigation. For news organizations dependent on a competitive digital advertising market, four more years may be too much to wait.

When investigations become litigation, Canadians can expect to wait another three to seven years for a resolution of practices potentially harming competition. If property controls are indeed weakening competition in the grocery sector, Canadians should not have to wait for up to a decade for more competition in such a critical market.

Accordingly, the committee should consider ways in which the investigation and litigation processes could be reformed to speed up the resolution of competition cases. One step would be to improve the information-gathering powers of the Competition Bureau with powers more akin to the Office of the Privacy Commissioner or the provincial securities commissions. If an investigation leads to litigation, the ability to stop parties from engaging in potentially problematic conduct while the litigation is ongoing should be strengthened. Finally, for the speedy resolution of litigated cases, the process of litigation should be streamlined, and the future role of the Competition Tribunal should be a topic of study.

Along with a more rapid resolution of competition issues, Canadians also deserve greater transparency into the activities of a strengthened Competition Bureau. Balancing the needs of confidentiality and accountability, Canadians should not be left in the dark about the investigations that the Competition Bureau is currently engaged in. A positive step in this direction would be a repeal of the language. This requires the bureau to conduct its investigations in private, which introduces ambiguity with the Competition Act's existing confidentiality requirements. While this would still leave transparency in the hands of the Competition Bureau, it would be an important signal to Canadians that more transparency is desired and a first step towards a Competition Bureau that is more open with Canadians.

The work of this committee has resulted in a competition law better equipped to promote competition and protect Canadians. A necessary next step is to think about improving the systems responsible for executing that law.

Thank you for your time. I look forward to your questions.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you very much, Mr. Bester. You're just a little under time.

Our final presenter today is Mr. Hatfield, from Open Media.

[Matthew Hatfield, Executive Director, OpenMedia]

Good morning. I'm Matt Hatfield, and I'm the executive director of Open Media, a non-partisan grassroots community of nearly 270,000 people in Canada who work for an open, affordable and surveillance-free Internet. I'm joining you from the unceded territory of the Sto:lo, Tsleil-Waututh, Squamish and Musqueam nations.

I confess that I'm at a disadvantage in textual analysis compared to my fellow witnesses, whom we've just heard. I'm neither an economist nor a lawyer. Consider me a representative of ordinary Canadians in the room, reminding you of why this all matters. In that light, I'm very pleased to see this committee continue its work to strengthen our competition laws by studying Bill C-352. Bill C-56 and Bill C-59 have made a strong start to getting competition right in our country, but alone they are not sufficient to rebalance our laws to truly serve Canadians first.

Canadians do not believe that our competition laws are serving them. Last year, we conducted a Mainstreet Research poll that found that nearly 70% of Canadians believe our existing competition laws are designed to serve the interests of oligopolies more than those of ordinary Canadians. That was not a partisan finding. Majorities of Canadians who vote for each party felt that our laws serve large corporations ahead of them. A full 92% of Canadians believe that Canada's extremely high market concentration in many sectors is a key driver of our very high consumer prices. Again, there was a very small partisan difference.

Within telecommunications, OpenMedia's specialty, we have decades of evidence from across the country that prices track the number of competitors in a market. Prices go down when there's a third or fourth provider, and they spike when a company leaves the market. Put briefly, no matter who you come to this committee to represent, your constituents and your voters are looking to you to deeply reform the rules of the game in Canada to drive more competition between companies and more fairness for Canadian consumers.

Supporting Bill C-352 will demonstrate your commitment to better market competition. Placing the onus on large companies to demonstrate that their merger is unlikely to harm competition; giving the bureau expanded power to study what's going wrong in a sector and recommending how to improve it; and providing more meaningful penalties for subverting competition law and longer periods to undo damaging mergers are all smart, proportional proposals that we believe will meaningfully improve competition in Canada in ways that ordinary Canadians will feel in their daily lives.

Strengthened presumptions against mergers in already overly concentrated sectors in particular will be a very powerful tool against deals like the Rogers-Shaw buyout, which this committee condemned and which was soon followed by price hikes for many of Rogers' mobile consumers. With Bill C-352 passed, the Competition Act will continue to afford large businesses many opportunities to defend and successfully carry out mergers and buyouts that are in the public interest.

When I wrote my opening remarks, I expected that some witnesses would tell you that this set of amendments would place some of Canada's largest companies on the defensive when they contemplate buying each other out, uncertain that a merger and acquisition strategy will succeed. I know that some have. That's good. They should be on the defensive for a change. Businesses out-competing each other through vigorous market competition is much healthier for our economy and Canadian consumers than businesses solving their competition problems by financing buyouts and mergers and by reaping monopoly rewards for it. Some flexibility for the bureau and tribunal to examine different models of defining a market, for example, is a good thing, in OpenMedia's view, for better enforcing competition.

For decades, we've deferred to a very narrow view of how to define markets and identify competition problems. That has served us very poorly. Many democracies have gotten competition wrong over the last four decades, assuming that competition mostly sustained itself and that disruption would always come from market leaders. That has not happened. Competition is very powerful, but it requires an active and intervening regulator to sustain itself, particularly in sectors with naturally high investment costs, like telecommunications and tech. Canada has had the weakest competition laws in the OECD for many decades, and Canadians are paying proportional costs for that. From telecommunications to groceries to housing, we're a world leader in consumer costs, but we're far from a world leader in the quality of what we receive or the incomes we have to pay for it.

We believe that Bill C-352's remaining amendments that are not yet passed are modest and proportional to Canada's competition problems. If what's left seems bold to you, I encourage you to be bold. The scale of Canada's problems does not call for small, edge reforms. Nearly 24,000 Canadians have endorsed OpenMedia's anti-monopoly charter, which calls for our government to permanently block the formation of larger oligopolies in Canada. Bill C-352's strong presumption against mergers would be a powerful tool to this end. On behalf of our community, I ask you to support and pass it.

I welcome your questions.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you, Mr. Hatfield and all the witnesses.

We'll now begin the opening round of questioning. We'll start with MP Williams for six minutes.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you, Mr. Chair. You're doing a great job so far.

Thank you to our panellists. This is a super panel on competition. It's great to have everyone here.

Dr. Quaid, you asked the question of why we are doing this. That's a really good question. I think Canadians right now understand that we have little competition. We have been spending the last few meetings specifically talking about what Canadians are seeing from the mergers that have been approved. This government approved HSBC and RBC, WestJet and Sunwing, and Rogers and Shaw. They really had little to do with the law.

Of course, Rogers-Shaw went through the tribunal. This panel was the one that said it didn't want to see that go through. We thought it would be uncompetitive. It still went through the tribunal, but the government had the chance to say no. The NDP could have stood up to the government—they have a supply agreement—to say no. That didn't happen.

Mr. Hatfield, it's been over a year now since that merger went through, and this government is claiming that prices have plummeted. From your angle at OpenMedia, are prices and bills down for Canadians?

[Matthew Hatfield]

Overall, no. What the government is referring to when they talk about that is that data caps have gone up for many Canadians. However, if you go from 10 gigabytes to 20 gigabytes and the government calls that a halving of prices, that's not a fair way of looking at your bill. Most people's bills have gone down very little, if at all.

It's a key point that the wired Internet plans many people are using have gone down maybe a couple of dollars over the last couple of years, but in many similar states, such as the U.K. and the U.S., they've gone down by about half. Even if we see a very small decrease in Canada, we're actually falling further behind compared to international competitors.

[Ryan Williams, Conservative, Bay of Quinte, ON]

When we look at the numbers, the ARPU—the average revenue per user—for Rogers has gone up over the years. It is showing that they're making massively more dollars. Competition is important.

Dr. Quaid, you're right on. You've had some thoughts on changes. I'm going to let you expand on some amendments you'd make to this bill that look at clause 3 and others. Can you expand on that, please?

[Dr. Jennifer Quaid]

I'll try to do that as efficiently as possible. Thank you for the question.

I would really like to see clause 3 stay with what was done in Bill C-19. I'm preparing a brief with a little more detail. I'm sorry that's not ready right now. If need be, there can be further guidance provided in other ways, but I am very reluctant to go back to having a cap on the fines because, unfortunately, maximum penalties are not minimum penalties.

There was a lot of discussion last week that seemed to treat this maximum penalty as some kind of minimum and it's not. Believe me, you do not want to have a mandatory minimum because this provision applies to individuals and corporations, and you will immediately trigger a charter argument. Whether it succeeds is a different question. I think giving courts the maximum flexibility is the better way to go. If there are preferred ways of calculating fines and preferred ways of dimensioning what would be appropriate punishment, those things can be put together in judicial training.

You could even have the bureau develop further its immunity and leniency programs. There was a lot of discussion of the Canada Bread case. I won't have time to get into it now, but the thing you need to know about corporate sanctions is that they're negotiated settlements that come under the immunity and leniency program. The first one in gets immunity and the second ones get leniency. Even if you had a maximum fine and you started with the maximum fine, which is what happened with Canada Bread, there is still a 30% discount because that's part of the leniency program.

People are talking about 10% of revenues. That's the maximum. Courts never impose the maximum, especially with a first-time offender, which is what mostly happens with corporations, and especially when you have other factors like co-operation. We need the co-operation of the participants in a cartel to get anywhere with these investigations. The idea that you would hit these maximums is fantasy. We need to dimension our expectations differently. That doesn't mean courts wouldn't benefit from help figuring out the right way to calculate the right kind of fine.

I'm going to leave the structural presumptions to the economists. I tend to agree that guidance on thresholds is helpful, but it shouldn't be in the law. That's my view. It's part of the larger question of having principles in the law and operationalization in guidelines.

The other thing is about the efficiencies defence, but I don't really want to talk about it that way. It's the recognition of pro-competitive benefits. It's a mistake to think that pro-competitive benefits shouldn't be explicitly recognized in the law. I just think taking the old language is not the right way to do it.

I'm going to loop around to my main question, which is that we haven't thought about what we're doing. In order to give any kind of context to how you're going to assess pro-competitive benefits, you need to ask, “Pro-competitive in relation to what?” One thing we've had in the way the efficiencies defence was interpreted in the past was a total surplus model, which says that we only care about whether the pie is bigger; we don't care who gets what piece. If you want to add into that a concern for consumers—like a consumer surplus type of model—then perhaps you need to be more explicit about that in guidelines. However, I wouldn't put it in the law.

Things like that are given content when courts interpret the words. We can get ahead of that by thinking about what it is about pro-competitive effects that we want recognized and when they are important. I also think efficiencies and so on are more complex than just—

[Ryan Williams, Conservative, Bay of Quinte, ON]

I have a quick question.

You've mentioned in the past that this government promised a revamp of the whole act. I think you've said it's supposed to be 2.0—the whole thing.

When was this promised? When were you told it was going to be delivered, and how delayed is it?

[Dr. Jennifer Quaid]

No one made me any specific promises. I'm an academic.

I had hoped when it was first announced that there would be phase 1 and phase 2. Phase 1 was Bill C-19. We all expected that was going to be mostly small changes. I had hoped with the announced consultation, before the details were announced, that we were going to step back and ask what we were doing. Are we modernizing the act? As soon as I saw the consultation document, I realized that we were leaving unchanged the basic structure of the act and, more importantly, what the goals of competition were.

There was more optimism, in my view, after the Wetston consultation, which was much more informal and fewer people participated in. It was like the sky was the limit. Everyone just said, “Let's figure out what we want for the 21st century.” By the time we had the consultation, we'd already taken off the table considering the purpose clause and considering the basic organization of the act. I thought that was too bad, personally.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you. MP Williams.

MP Turnbull will begin the next round.

You have six minutes.

[Ryan Turnbull, Liberal, Whitby, ON]

Thanks.

Ms. Quaid, I'm going to start with you. I appreciated your opening remarks, and I appreciated specifically you outlining what pieces of Bill C-352 have overlap and remain as questions we can consider. Where I'm starting this conversation is that with Bill C-56, Bill C-59 and Bill C-19, to some degree, we've dealt with rounds of reforms to the Competition Act. We've had lots of debate about that. I think there are some very good steps forward.

Perhaps all of the panellists today have different opinions about different pieces of that, and I get that the legal community is not always going to agree. Neither are politicians. I think the debate is important.

I want to hone in on your comment because I found it a useful structure. You looked at clauses 3 and 4 as a package, although they're different. I think you said that you're not sure they are going to get the desired outcome.

Could you explain what you think the intended outcome was from listening to Mr. Singh's appearance? Then, could you explain specifically why the two changes being proposed to those clauses would not get the outcome that was intended?

[Dr. Jennifer Quaid]

I will start by saying that I can't climb inside Mr. Singh's mind. I listened to what he said, and this is my interpretation of what he said. I certainly stand to be corrected if I've misinterpreted him.

I understood that what he wants to see is greater accountability in the form of a higher quantum of fines that's more closely related to the capacity to pay, essentially. If you are a multi-billion dollar company, a $25-million fine is not going to make a sufficient financial impact. I understand what that reflects. Mr. Singh was very concerned about the punishment imposed in the Canada Bread negotiated settlement. I might use that as an illustration.

One thing we have to be very careful about is that changes to criminal law that make it more severe or change the substance are prospective only. The change in Bill C-19 to make the fine at the discretion of the court applies to cartels or conspiracies entered into after June 23, 2023. Most cartels are not discovered immediately. The bread cartel—this is a lesson in how long it takes for things to come into effect—involved counts in 2007 and 2010. The applicable fines were those applied in 2007, which were $10 million. In 2010, they just squeaked into the new provisions, so you had $25 million.

The court worked with the maximum, and it was very surprising. They applied the maximum in those cases, and I think it was a recognition that they were butting up against the highest amounts. However, normally, courts do not treat the maximum as where they're starting. That's not how sentencing works. Sentencing starts with the idea that a sentence has to be proportionate to the gravity and culpability involved.

We can agree that conspiracy, in section 45, is targeted at morally reprehensible conduct. One of the functions of the penalties—and on that, I agree with Mr. Singh, but I don't think the discretion of the court was a problem; I think that's a better signal—is to convey seriousness. It's not an accurate measure, but an offence that carries a maximum 14-year imprisonment connotes a serious amount of gravity. Not many other provisions in the Criminal Code are economic in nature and carry that kind of sanction, so it's a very severe sanction.

The expectation that the application of sentencing principles is going to result in something that hits up against the 10% is unrealistic. That's not how it happens. My research shows that when courts apply the sentencing factors adapted to business organizations in section 718.21, they're all over the map. They're not consistently applying them as aggravating or mitigating. What happens is you do not necessarily get the outcomes you want.

Here's the solution. If you really want courts to be more thorough and to apply and get to sanctions that are adapted to reality, you have to give more than what you can give in a law. The law is going to be too simple, and it's not going to give enough detail. Left with that, you won't get the results you want. You're going to need judicial education and a lot more structure.

The final thing I'm going to say is that we are not a jurisdiction that uses sentencing guidelines. I don't think a change in the Competition Act is going to change sentencing policy in this country. If you want to change criminal law, you have to start with the Criminal Code. I know this is the Competition Act, but when you're talking about using criminal law for an extremely serious offence, you cannot get away from the structure of criminal law.

I'm sorry for the long answer.