Thank you, Mr. Chair and honourable members of the committee.
My name is Jennifer Quaid, and I am an associate professor and vice-dean for research in the Civil Law Section of the University of Ottawa. My fields of expertise are corporate criminal law, competition law, anti-corruption law, business law and general criminal law.
I am very pleased to be appearing before you today to discuss competition law as it relates to SMEs.
I will begin by briefly providing some general competition law background. I'll be switching between English and French during my remarks. I hope that isn't a problem for anyone.
I would like to focus my remarks on the ways in which competition law and policy relate to SMEs. In doing so, I will discuss the current amendments that have been put forth in the first budget implementation act and how these may affect SMEs. I will also touch on the importance of broader reform to competition law and policy and the importance of integrating competition policy into a larger, transversal approach to economic policy.
Competition policy is a part of economic policy and as such should operate in tandem with other policies across departments and agencies in the service of Canadian society as a whole. At present, competition policy, particularly the specific framework of rules that form the body of competition law, the act and its legal interpretations, has developed largely as a distinct field. It has tended to have a small footprint, erring on the side of lesser intervention rather than greater. It is built on a foundation of neoclassical economics, which assumes that in general market capitalism should be left to operate with as little intervention as possible. I am generalizing here. Where an intervention is required, it should be as minimal as possible, to address the worst of anti-competitive effects that could have been or might be caused.
There are a couple of things that characterize competition law that are germane to the work of this committee.
First, the purpose of the act is not competition for competition's sake. The guiding principle is that competition is the best way to generate certain desirable benefits in society. These desirable benefits are identified in section 1.1 of the act. Other experts who have appeared before you have spoken about these benefits. There are four of them: promoting the efficiency and adaptability of the Canadian economy, expanding opportunities for Canadian participation in world markets while at the same time recognizing the role of small and medium-sized enterprises, ensuring an equitable opportunity to participate in the Canadian economy, and providing consumers with competitive prices and products.
There is much debate about the purpose clause and which goals are or are not identified in it. At this critical juncture in the digital transformation of society, the time is right to take a hard look at the purpose clause. Is it, as some have argued, an arbitrary and unworkable collection of aspirations that are largely incompatible? Does it identify too few goals? If so, what other goals should it expressly include? Would it be better to create a single statement oriented to the public interest or, as others have argued, should we just fall back on economic efficiency?
I won't go over what other experts have talked about in terms of the debate over the purpose clause, but I think it's very important to consider the context of SMEs in the larger discussion about competition policy.
The second point that's germane to SMEs in particular is that the Competition Act is a law of general application. This is typical of the drafting style we use in Canada. It is also characteristic of legislation that applies to business entities. However, the practice of using general rules tends to obscure important structural differences and economic realities of SMEs versus larger business entities. The sheer range and variation in models of business organization mean that rules intended to apply equally, because they are the same for everyone, in fact produce profoundly different effects.
I would be happy to expand on this in the question and answer period, in particular in relation to the proposed amendments to Bill C-19.
There is a third crucial point, and it relates to the previous one. The digital transformation is having significant impacts on business practices, business models and corporate growth and innovation strategies.
However, SMEs are experiencing the digital transformation in a different way than large businesses. Without meaning to overgeneralize, it is important to acknowledge that, as in situations of asymmetrical power between consumers and businesses, there is also an imbalance between SMEs and global-scale businesses, particularly those that control online platforms and develop information technologies that are necessary to access e‑commerce and digital markets.
The concentration of power in the hands of a small number of private actors, together with significant deficiencies in the framework governing the various aspects of the economy and society that we characterize as digital—a framework that embraces privacy law, data protection law, interoperability issues, the use of artificial intelligence in a growing number of fields and the impact of social media—create a situation in which access to economic participation may be restricted or subject to conditions that are onerous and even exclusionary for SMEs.
I would like to comment briefly on Bill C‑19. I will do so as quickly as possible, but I'll be happy to address these issues in greater detail if you wish to know more about them.
It is important that you pay particular attention to the amendments being proposed, even though the budget process is quickly moving ahead. These proposals, which could well be adopted without change, will have a major impact on SMEs.
To put it bluntly, there can be no doubt that the proposed amendments to the Competition Act would effect substantive changes. They may be appearing in a budget bill, but they are set forth with the clear aim of starting a reform of business law.
According to the government's statements, division 15 of part 5 of the budget bill is only the first draft of a two-part reform. Division 15 constitutes the preliminary phase. The second phase, for which we do not know the timeline, will be preceded by a public consultation designed to survey every party interested in the role of competition policy in the 21st century, particularly with regard to the digital transformation of the economy and our society.
Of course, I have much more to say on these matters, but I'll stop here with regard to this part. However, I would like to provide a brief enumeration of the amendments proposed in this bill.
Eight changes are here proposed. Four of them are widely expected, since Minister Champagne and Commissioner Boswell have expressly referred to them in public statements in recent months.
The amendments are as follows: the addition of a provision creating an employment-related conspiracy offence; an amendment of the maximum amount of certain fines and administrative monetary penalties; the addition of a clause providing that the use of drip pricing constitutes a false and misleading representation that could result in criminal or civil prosecution; and the creation of a right of private access to the Competition Tribunal to remedy an abuse of dominance.
However, there are four more amendments. Although they are not entirely surprising, we didn't necessarily expect to see them immediately in a budget bill. They are as follows: amendments to sections 78 and 79 respecting abuse of dominance, particularly what constitutes conduct that may result in a proceeding instituted by the Commissioner; the addition of factors to be considered in determining the prevention or appreciable reduction of competition simultaneously affecting the provisions on abuse of dominance, amalgamation and civil collaboration; the addition of a general anti-avoidance provision in the notice of amalgamation process, which may be of less interest to the committee; and amendments to the power to order production of documents under section 11.
According to the government, there is a consensus on most of the proposed amendments, at least among those who have publicly stated an opinion, particularly as part of the consultation that was conducted by Senator Wetston, in which I took part.
This allusion to consensus suggests that the inclusion of these changes in the budget bill should not be of great concern, as few will disagree with them.
I could not disagree more.
While the Competition Act is in need of reform—and urgently—for reasons related to SMEs as well as the economy in general, the budget bill process is unlikely to be conducive to a thoughtful reform, even on those issues that some may consider low-hanging fruit. It is important to modernize the act, but if we do it poorly, without consideration of the bigger picture as well as the technical nuances, we risk simply changing the law without making competition policy any better.
I have two more points, and then I'm finished.
I just want to highlight that there are two modifications in this law that concern me greatly. The first is the creation of the wage-fixing offence. I'm happy to go into detail about why I think it's highly problematic, especially for SMEs. The second is the matter of the penalties that have been modified and the use of scalable penalties but in a very limited fashion. Here, I think there was an opportunity lost to make the act more aware of the differences between sizes in enterprises.
I will close by reiterating the importance of competition policy reform and that we need to do it well. This requires consultation from a plurality of stakeholders, notably owners of small and medium-sized businesses and all the people who are affected by this sector or who participate in this sector of the economy. We need to identify what values matter to us and what principles matter to us. Then we can decide how to change our competition policy. Half measures are simply not going to do it.
Thank you. I remain at your disposal for questions.
