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Breakfast with John Pecman: Key Messages from the Competition Bureau

Download this publication February 13, 2013

At a breakfast event held at the Toronto offices of Davies Ward Phillips & Vineberg LLP on February 7, 2013, Interim Commissioner of Competition John Pecman provided several insights into the direction of competition law enforcement under his leadership, particularly insofar as regulated sectors of the Canadian economy are concerned. Mr. Pecman also offered a spirited justification for why vigorous competition law enforcement "matters" to Canadians, noting that "when the Bureau does its job well", the Canadian economy flourishes, and individual consumers and businesses benefit.

Here are the top take-away messages from the session (including the Q&A portion following Mr. Pecman's prepared remarks):

  1. Promoting Competition in Regulated Industries – Mr. Pecman emphasized his intention to incrementally increase the Bureau's "strategic and targeted regulatory interventions" in Canada's regulated sectors. The Bureau is authorized under sections 125 and 126 of the Competition Act to make representations to federal and (on consent) provincial boards, commissions and tribunals, and Mr. Pecman stated that he plans to use this power more frequently to advocate for the promotion of competition. Mr. Pecman noted that regulated industries account for roughly 25% of the Canadian economy which is why, in his view, reducing "inefficient and ineffective" regulations in these sectors could lead to substantial benefits for the Canadian economy and consumers.

    As an example of this reinvigorated effort, Mr. Pecman noted that the Bureau submitted comments to the CRTC on February 6, 2013 regarding the CRTC's proposed code of conduct for mobile wireless service providers. Mr. Pecman also sees the retail and health sectors as potential areas for regulatory interventions, with the Bureau looking specifically at issues such as beer distribution in Ontario and the restrictions on advertising pharmacy dispensing fees. Given the Bureau's limited resources, however, Mr. Pecman stressed that the Bureau will intervene only to address issues that are important to the Canadian public and where it believes it can make a difference.

    Although Mr. Pecman focussed on regulatory interventions in his remarks, he also mentioned the desirability of clarifying the common law "regulated conduct defence" (RCD), which shields industry conduct from the Competition Act to the extent that this conduct is directed or authorized by statute or regulation. Doing so, however, would likely mean having to take on a case where the issue can be litigated. Mr. Pecman gave no indication that the Bureau has any specific cases in mind, but clarifying the RCD issue is clearly part of Mr. Pecman's agenda going forward.

  2. Clarifying the Overlapping Roles of the Competition Bureau and Other Regulators – Recent transactions such as BCE/Astral and Maple/TMX have driven home the challenges faced by merging parties whose transactions are subject to scrutiny by multiple regulators. Mr. Pecman recognizes the inefficiencies inherent in multiple review processes and indicated that he has reached out to some regulatory authorities including the CRTC and Transport Canada, to discuss avenues for coordination. On the criminal side, Mr. Pecman has also had discussions with Public Works and Government Services Canada (PWGSC) regarding coordination on the prosecution of bid-rigging offences and on leniency-related issues arising from PWGSC's new rules on eligibility for bidding on federal government contracts. Mr. Pecman's goal is to conclude memoranda of understanding or protocols between the Bureau and other agencies that would give companies a better indication of how these various agencies will carry out and coordinate their concurrent mandates.

    On the international side, Mr. Pecman confirmed that, while the Bureau remains committed to cooperation with foreign competition law agencies, the Bureau's policy is not to share a business’s confidential information with a foreign agency unless the agency offers sufficient confidentiality protections. Mr. Pecman also noted that information sharing is typically limited to exchanges of details on process and the discussion of case theories at a general level without the actual sharing of evidence.

  3. Expect More Contested Criminal Cases – Mr. Pecman confirmed the Bureau's intention to seek jail sentences for individuals in criminal cartel cases, particularly now that amendments to the Criminal Code have eliminated the availability of conditional sentences for the bid-rigging, conspiracy and criminal misleading advertising offences under the Competition Act. Mr. Pecman acknowledged that this more aggressive approach (combined with the higher stakes associated with a guilty verdict or plea) may mean more contested prosecutions and fewer plea settlements than has been the case in the recent past.

  4. Recent Wins and Losses – Mr. Pecman announced that the Competition Bureau had recently suffered a setback in its prosecution of a bid-rigging case involving five high-rise construction projects in Montréal. The case was dismissed at the preliminary hearing on the basis that the prosecution failed to provide sufficient evidence for each of the relevant projects to show the existence of a "call or request for bids or tenders" as is required in the bid-rigging provision in the Competition Act. Nonetheless, Mr. Pecman affirmed that the Bureau remains "steadfast" that its approach in this case was "just" and also noted his understanding that the Public Prosecution Service intends to seek a review of the Court's decision.

    While noting this loss, Mr. Pecman also discussed the Bureau's victory in an Ontario Court of Appeal decision which recently upheld the lower court's ruling imposing penalties on a set of related companies and their principals for contravening the Competition Act's misleading advertising provisions. The case concerned unsolicited faxes sent to Canadian businesses that, through the unauthorized use of "Yellow Pages" and "Walking Fingers" designs, were designed to lead consumers into unknowingly committing to significant subscription fees. One of the individual defendants appealed the lower court's imposition of an administrative monetary penalty of $500,000 (the statutory maximum for an individual is $750,000). In upholding the lower court's decision, the Court of Appeal noted that the companies were only vehicles for their principals and that the individuals had used the companies to net many millions of dollars with very low costs. Furthermore, in this particular case, the individuals involved were found to have blatantly disregarded attempts from other jurisdictions to enforce compliance, as well as an order of the Ontario Superior Court of Justice.

  5. Reliance on Court Orders in Place of Voluntary Information Requests – Mr. Pecman reiterated his recent announcement that the Bureau will now seek court-issued production orders (section 11 orders) to obtain information from the targets of non-merger inquiries (principally involving allegations of abuse of dominance and misleading representations), and will rely on voluntary requests for information only on an exceptional basis. Aside from the compulsory nature of such orders, another practical impact of this change is that Bureau investigations may become public much earlier, since court filings required to obtain section 11 orders are generally available to the public upon request. Companies that find themselves the subject of such investigations should be prepared to face the adverse publicity and perhaps even class actions, that sometimes follow the announcement (or leak) of Bureau investigations.

  6. Transparency and Outreach – Mr. Pecman repeated the message that he wants to increase Bureau transparency and coordination with stakeholders. In addition to continuing the publication of more detailed analyses of complex merger cases that the Bureau decides not to challenge, Mr. Pecman indicated that the Bureau is reviving its practice of holding "sector days" to consult with specific industries on relevant competition issues. On the issue of advisory opinions, Mr. Pecman said that he is not inclined to provide more robust opinions to parties seeking guidance on specific non-merger conduct. He said that advisory opinions are a significant drain on resources and that their utility is limited because they address specific fact scenarios. In addition, Mr. Pecman observed that advisory opinions have been used in litigation against the Bureau, even in cases where the circumstances had changed since the advisory opinion was issued.

Mr. Pecman's prepared remarks are available on the Bureau's website. We would like to thank Mr. Pecman for his frank and informative comments.

If you have any questions regarding the foregoing, please contact George Addy (416.863.5588), Anita Banicevic (416.863.5523), John Bodrug (416.863.5576), Adam Fanaki (416.863.5564), Mark Katz (416.863.5578) or Charles Tingley (416.367.6963) in our Toronto office or Hillel Rosen (514.841.6443) in our Montréal office.

Davies Ward Phillips & Vineberg LLP is an integrated firm of more than 240 lawyers with offices in Toronto, Montréal and New York. The firm is focused on business law and is consistently at the heart of the largest and most complex commercial and financial matters on behalf of its clients, regardless of borders.

The information and comments herein are for the general information of the reader and are not intended as advice or opinions to be relied upon in relation to any particular circumstance. For particular applications of the law to specific situations, the reader should seek professional advice.

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