The head of the federal Competition Bureau says Canadian competition law needs a makeover, and that Canada should take cues from the U.S. in reforming its framework.
In the 14 years since Canada’s Competition Act was last reviewed, Commissioner Matthew Boswell told The Globe and Mail, the country’s antitrust rules have lagged those in the United States, Australia and Europe. He cited Canada’s relatively weak penalties for anti-competitive behaviour, and tight timelines that make it more difficult for Canadian regulators, compared with their counterparts in the U.S., to review and respond to mergers that may harm competition.
“Canadian consumers are the ones who feel the impact of a lack of competition in Canada,” Mr. Boswell said. “Competition drives businesses to innovate, to improve quality so consumers get better-quality services or products. It decreases prices, it causes good disinflation in the economy. And it ensures that businesses succeed through merit.”
Aligning Canada’s competition regime with the Federal Trade Commission in the U.S. would increase the penalties at the Competition Bureau’s disposal, giving it more enforcement power. And the move would create continuity between two countries that have strong commercial ties. Cross-border merger-and-acquisition activity between Canada and the U.S. accounted for $88-billion in deal value in the first half of 2021, according to data from Bloomberg. The figure matches the value of domestic Canadian M&A during the same period.
“I believe it makes sense for our law to line up as seamlessly as possible with the American law, and that would give businesses on both sides of the border certainty and predictability with respect to how mergers are going to be reviewed,” Mr. Boswell said.
An alignment in competition law between the two countries could also mean more restrictions on mergers and anti-competitive behaviour in Canada. This summer, U.S. President Joe Biden issued an executive order aimed at limiting corporate concentration and protecting consumers from economic harms that come from consolidation. He also announced an array of new consumer protection measures, including some that would lower prescription drug prices and make it easier to switch banks.
“What we’ve seen over the past few decades is less competition and more concentration that holds our economy back,” Mr. Biden said in July. “Rather than competing for consumers, they are consuming their competitors.”
Mr. Boswell said he shares the President’s concerns.
One of his main priorities is getting the Competition Bureau more resources to handle merger reviews, which would give the agency more ability to challenge transactions. The bureau will receive an additional $96-million in federal funding over the next five years, but none of those funds will go directly to its merger review program, which is paid for through companies’ filing fees. Instead, the bureau will use the money to strengthen its enforcement capacity and expand its litigation team.
The bureau will also use the new funding to keep up with technological innovations that present new challenges in competition law. Social media, e-commerce, and blockchains are examples of technologies that were not ubiquitous when the Competition Act was last reviewed.
“People used to talk about the digital economy as a part of the economy,” Mr. Boswell said. “Now, effectively, the digital economy is the economy.”
A recent case is emblematic of the hurdles Mr. Boswell faces. This summer, the bureau failed to obtain a last-minute injunction from the federal Competition Tribunal – a separate administrative body that adjudicates competition matters – to stop Secure Energy Services Inc. from acquiring Tervita Corp. in a $478-million all-stock deal.
The bureau argued that consolidation of the two large waste-management services firms, which serve oil and gas companies in Western Canada, would harm customers, who would likely pay higher prices.
The bureau had only a month to review nearly 400,000 documents from the parties. The deal closed on July 2, even though the bureau was still investigating.
According to a tribunal decision in August, the bureau proved that the deal would cause “irreparable harm” to oil and gas producers in the region, but failed to quantify those harms adequately. Secure, meanwhile, had met the threshold for quantifying the harm it would face if the deal did not consummate. The bureau is still challenging the transaction, postclosure.
“The injunction decision on the Secure matter sort of reinforces the fact that we have to do a lot of work at the bureau in a very short period of time to be able to bring an injunction before the tribunal, and to put the evidence that the tribunal requires in front of it in order to obtain that injunction,” Mr. Boswell said.
Secure said the deal would create major cost savings for itself, as well as efficiencies. A unique aspect of Canadian competition law is that companies can argue that a deal that would produce significant efficiencies should be allowed if those efficiencies outweigh other negative outcomes related to competition. This is another area where Mr. Boswell suggests taking a page from America’s book.
In the U.S., he said, “efficiencies can be considered as one of the many factors that are considered by the court, and the efficiencies can be considered if they’re efficiencies that are going to benefit consumers.”
But in Canada, he added, efficiencies-related arguments often work against consumers. “The way we have it now, the efficiencies will often benefit the shareholders, the corporations themselves. And it doesn’t have to be a requirement that those efficiencies will directly benefit the consumers.”
Mr. Boswell said that Canada is also behind its peers in terms of the punitive firepower it can use to discourage anti-competitive behaviour.
“Our criminal fines and our fines on the civil side ... are not high enough,” he said. “They have caps on them that are are sort of arbitrary caps. They don’t reflect the size of the business that we’re dealing with or the size of the economic harm to consumers or to the economy.”
Michael Laskey, a partner in the competition and foreign investment group at Stikeman Elliott, agreed that Canada needs to be able to punish anti-competitive actors with more force.
“In Canada, basically the maximum fine if you engage in cartel behaviour is $25-million,” he said. “In the United States, you can receive fines in the hundreds of millions.”
Mr. Laskey believes that the federal government may soon move to modernize Canada’s competition law, partly because of reforms in the U.S. and Europe.
“I think it’s fair to say that the winds of change are blowing in the commissioner’s direction,” he said.
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