If the competition commissioner’s mandate was expanded so that she could publicly comment on anti-competitive or potentially anti-competitive consequences of government action, it would go a long way toward improving the competitive market in Canada, says one competition and antitrust lawyer.
James Musgrove, chair of Lang Michener LLP’s competition group, says he hopes the five-person panel - recently created by the federal government to review Canada’s foreign investment and competition policy - will make this recommendation when it reports back to Industry Canada by June 2008.
The primary roles of the competition commissioner - currently Sheridan Scott - are to enforce the Competition Act and advocate for competition in the marketplace by conducting studies and making submissions before parliamentary committees with a view toward promoting competition principles, says Musgrove.
“That second role as competition advocate is very important,” he says. “I think the panel would do a lot for our economy if it were to strengthen that role and give the commissioner the right of input, not just formally before the CRTC or before other commissions, but in the policy-making process, so she would be called upon to express her views as to whether a policy is or is not promoting competition.
“If the department proposing a particular policy knows that the commissioner is going to come out and say, ‘Well, you can do that, but understand that there are competitive tradeoffs that are negative,’ they may rethink the policy,” he tells Law Times. “We have people with similar roles. We have auditor generals. We have privacy commissioners,” he adds.
Making this change would be a courageous step for the government, but would help the commissioner accomplish her role as the protector of important competition policy, which, in specific instances, no one is motivated to protect, he says.
“The problem with competition is that nobody really likes competition very much. In general, we all like it. But in particular instances, we all want to avoid it in our own lives and have monopolies,” he says. “I think that if that change were made, that would probably be the single most important change you could make to the Competition Act to improve the competitive market in Canada,” Musgrove notes.
Musgrove is also the chair of the Canadian Bar Association’s national competition law section, but he stresses his comments about this issue and about the review panel generally reflect his personal opinions, not those of the CBA.
The federal government’s panel will review key elements of Canada’s competition and investment policies. The panel’s core mandate is to review the Competition Act and Investment Canada Act.
It will also examine the foreign ownership restrictions affecting specific sectors and consider the competition and investment regimes of other jurisdictions to assess reciprocity between their rules and Canada’s. And it will assess how to encourage Canadian outbound investment.
Canada’s competition and investment policies have not been substantially changed in more than two decades, notes a government press release about the creation of the panel.
“This panel will help us determine whether we are indeed keeping pace in the highly competitive global economy,” says federal Finance Minister Jim Flaherty in the release.
CAE Inc. chairman Lynton Wilson will lead the panel, which also includes co-chair of Osler Hoskin & Harcourt LLP Brian Levitt, the executive chairman of Open Text Corp., P. Thomas Jenkins, oil billionaire Murray Edwards, and Board of Trade of Metropolitan Montreal president Isabelle Hudon.
Musgrove says the purpose of the task force is still not clear. “We’re all struggling with that to some degree. We think this is an indication that the government wants to make sure its competition and investment policies are up to date and appropriate for the times we live in,” Musgrove says.
He does not think - and he hopes - that the panel has not been formed as a reaction to complaints that corporate Canada is being “hollowed out” by foreign takeovers. “I don’t think that’s where they’re going, but we’ll see,” he says.
It’s possible the government may view the rules review as a way to relieve political pressure to deal with the hollowing-out fears.
“To be frank, whenever you call for a study, that takes the heat off for a moment and allows the thing to be dealt with more carefully,” he says. “So I think there may be a short-term political agenda, but there’s also a longer-term desire to make sure we have an efficient economy.”
He hopes Canada doesn’t end up with a policy that encourages less free markets for investments in Canada, because Canadian assets will become less valuable if fewer people can buy them.
“While there may be good policy reasons for restricting the ability of foreigners to invest in certain assets, there’s a price to be paid for that,” he says, adding he believes, “The alleged advantages of that are advanced loudly. The disadvantages, I think, are not. Every time you restrict competition in whatever market for whatever reason, there are consequences, and I think that’s important to bear in mind.”
Musgrove adds he also personally hopes the panel steers clear of detailed statutory drafting, and instead re-articulates the purposes and goals of competition law.
“I would encourage the panel to review what the purposes of our competition legislation are, because if you look at s. 1.1 of the act, there are four different purposes, which are not entirely consistent with one another, articulated there.”
Musgrove says that, when the act was first brought in, “most people thought its purpose was to achieve an efficient economy. There’s been considerable debate about that since then . . . I think it would be useful for the panel to revisit that question.
“I’m less of the view that the panel should get into the detail of drafting of particular sections of the act because, if it reconfirms the basic goal, then we know what we are drafting for,” he says.
George Addy, head of the competition law group at Davies Ward Phillips & Vineberg LLP, says that while the panel’s final mandate hasn’t been made public yet, it’s his understanding it will look at competition law on a broad scale by reviewing not just the Competition Act, but how competition policy in various departments and statutes impacts Canada’s competitiveness in foreign markets.
The other part of the mandate involves looking at whether there’s a need to revisit elements of the Investment Canada Act, he says.
“Whether we have the right benchmarks there, whether we need to introduce more, whether or not the issue of hollowing out has any legs or not, and what the panel suggests the government do about it, if anything,” he says.
Addy says he would like to see the panel make specific concrete recommendations, and says the Investment Canada Act clearly needs updating.
Legislative anomalies exist between this act and other pieces of legislation, he says. For instance, there is a different test for determining what a Canadian business is for the purpose of the Investment Canada Act compared with making the same determination for income tax purposes.