Scorecard – Merger Efficiencies Reform: No; Conspiracy Reform: Yes

Article by Blakes Competition Group, © 2006, Blake, Cassels & Graydon LLP

Commissioner Scott Outlines The Competition Bureau’s Year-To-Date Progress Report

On September 28, 2006, the Commissioner of Competition, Sheridan Scott, addressed the Canadian Bar Association’s Annual Fall Conference on Competition Law, held in Gatineau, Québec. In her speech, Commissioner Scott updated conference participants on the Competition Bureau’s progress on achieving the priorities that the Commissioner set out in her speech at the Spring CBA Conference and on her priorities for the remainder of the year.

On the legislative front, the Commissioner had two important announcements.

First, the Commissioner stated that she does "not consider that, in the short term, it is either desirable or advisable to seek amendments relating to efficiencies" under section 96 of the Competition Act. This provision creates an "efficiencies defence" for mergers. In particular, under the efficiencies defence, mergers that result in efficiencies which are greater than, and offset, resulting anticompetitive effects must be allowed to proceed if those efficiencies would be lost if an order was made blocking all or part of the merger. The Commissioner confirmed that the Bureau will look at efficiencies whenever they are presented and, most importantly, that the Bureau will not challenge a merger where the efficiencies clearly outweigh and offset the anticompetitive effects. The Commissioner urged merging parties to make "robust and thoughtful" submissions as early as possible that describe the parties’ motivation for the transaction and relevant potential synergies. The announcement makes it clear that the Bureau is not as hostile towards efficiencies as it was following the Federal Court of Appeal’s decision in Commissioner of Competition v. Superior Propane Inc. and ICG Propane Inc. It would seem that the Commissioner’s announcement opens the door to the possibility of major, strategic mergers in the future.

Second, the Commissioner noted that internal (Bureau) and external advisory working groups that have been studying various models related to potential reform of section 45 of the Competition Act (which is the provision concerning unlawful anticompetitive agreements) have completed their tasks. The Commissioner confirmed that the Bureau intends to formulate a proposal for reforming section 45 and will hold related technical roundtables to discuss the proposal in early 2007.

Other highlights from the Commissioner’s speech include:

• Looking ahead, the Bureau’s top enforcement priority continues to be fighting cartels, particularly domestic cartels. To this end, the Bureau has increased the Criminal Branch’s budget by approximately 50% over the last three years and it has strengthened the capacities of its regional offices. The Commissioner noted that the Bureau will maintain a zero tolerance policy for the obstruction of its investigations. The Bureau is currently updating its Immunity Program to enhance its cartel detection abilities.

• Its second priority is combating mass marketing fraud. It will recommend to the Attorney General that the following principles be promoted in all of its mass marketing fraud cases: "fines should equal the revenue generated by the scam; significant jail time is required in appropriate cases; and an accused can face both a fine and a jail term".

• The Bureau’s third and fourth enforcement priorities are to find better ways of enforcing the Competition Act with respect to online activities and efficiently enforcing the abuse of dominance provisions of the Competition Act. Regarding the latter, Commissioner Scott noted that the Bureau will seek to define "clearer monopolization standards and best practices", and in this respect "to define more clearly the boundaries of the abuse of dominance provision". Part of this work will involve a rationalization of the Bureau’s policy on predation.

• Finally, the Commissioner noted that the Bureau will continue its advocacy efforts, with particular focus on health (especially the pharmaceutical industry), telecommunications, and the selfregulated professions. In effect, Commissioner Scott noted that the Bureau will place a "competition lens" on these areas.

The Commissioner’s speaking notes are available at: http://www.competitionbureau.gc.ca/internet/index.cfm?itemID= 2201&lg=e.

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