Competition Act changes introduced as part of the federal government’s budget implementation bill could be a risk for Canadian business and should be debated as stand-alone legislation, says the Canadian Bar Association.
John Bodrug, chairman of the CBA’s national competition law section, has sent a pair of letters to the government to raise concerns about proposed Competition Act changes. The first letter was sent Feb. 3, three days before the amendments were cited as Part 12 of bill C-10, the budget implementation act.
The latest letter was sent on Feb. 13, one day after a second reading of bill C-10. The second letter acknowledged the CBA’s support for elements of the act changes, but said that the legislation should be severed and debated on its own merit.
“The proposed amendments in Part 12 are so far-reaching and technically complex that amendments to the Competition Act should be decoupled from bill C-10 and given separate and careful consideration as a stand-alone bill,” Bodrug wrote in the letter to Finance Minister Jim Flaherty and Industry Minister Tony Clement.
“This is necessary to avoid the risk of unintended consequences, including the imposition of significant and unnecessary costs on Canadian businesses of all sizes. Consumers will not benefit from the imposition of unnecessary costs and uncertainties on Canadian business.”
Despite the letter, it is unlikely the government would be willing to parse the Competition Act sections from the bill. Mike Storeshaw, director of communications for Finance Minister Flaherty, says the amendments were part of the Competition Policy Review Panel headed by Red Wilson and, as part of the budget act, will not be amended.
“Those recommendations encourage investment in Canada while protecting consumers and safeguarding Canada’s national interests as it reads in the budget,” Storeshaw says. “So the fact that these recommendations are being put forth in a budget implementation act, given that they were explicitly referenced in the budget, isn’t unusual in any way.”
One such amendment that has raised the ire of several competition lawyers is the proposed U.S.-style two-stage merger review process.
Canada presently employs a merger review system that can take a maximum of 42 days –– absent court orders or agreements. The competition commissioner can go to the Competition Tribunal to seek a continuance if she can show that she needs more time to conduct an inquiry into the merger.
Under the new two-stage, or second request process, the initial review will take 30 days and give the commissioner of competition the power to require a second period that lasts for an additional 30 days after full compliance of a request for documents. This would mean that the commissioner of competition could delay the closing of any transaction and that there would be no judicial oversight.
The two-stage merger review system prompted the first letter sent to Ron Parker, senior assistant deputy minister of the policy sector with Industry Canada, on Feb. 3, asking for a full consultation process to look at merger review changes.
“There were indications in the Conservative party platform and then the speech from the throne that the government was looking at implementing a fair number of these recommendations,” Bodrug says. “We thought that it would be appropriate to stay out ahead of the curve and kind of go on record with their merger review process.
“We put it in writing and sent that to the minister and it happened to go out earlier in the week and we didn’t know that the Competition Act amendments were going to be part of the budget bill, let alone any specific knowledge that the review process was going to be part of that too.”
The letter laid out the CBA’s concerns that the issue of a two-stage merger review process was never discussed as part of hearings into Competition Act changes. If it were it is likely that the government would have heard that the process is anti-competitive.
“Most competitive law experts in Canada, the U.S., and elsewhere in the world would agree that the U.S. ‘second request’ process is excessively burdensome, expensive, and time consuming,” wrote Bodrug, in the correspondence. “After 30 years it has not been adopted as a model in any other country in the world.”
The concerns were echoed by George Addy, partner with Davies Ward Phillips & Vineberg LLP and Canada’s former competition commissioner.
“It increases the power of the bureau, it increases the discretion of the bureau,” says Addy. “The second request decreases the courts’ ability to scrutinize the exercise.”
Under the second review process, the competition commissioner has up to 30 days to make a second request for information. The clock does not start on the second 30 days until the request has been completed in full.
Julie Soloway, partner in the competition, antitrust, and foreign investment group with Blake Cassels & Graydon LLP, says the timing is where companies face millions in costs as those in the U.S. currently do.
“It could take you three months to comply with the second request,” she says.
“These are massive document production orders. Massive, by the time you get the client organized, the search terms. So it could take two to three months and then once they are verified that your response to the second request is complete then the second 30-day period starts at that point.”
Bodrug says that even if you support the idea of a two-stage review process there is an argument that the legislation needs full and rigorous debate.
“This is the most fundamental amendment to the Competition Act in 30 years,” Bodrug says. “In my view it should be taken as stand-alone legislation and examined and considered and exposed to the full kind of committee process in itself. Not lumped in with such a range of other important changes as part of a confidence bill.
“Even if you support the intent of the legislation there are still details and nuances, it is very technical legislation and there should be opportunity for consideration.”
Scarborough-Rouge River Liberal member of Parliament Derek Lee spoke against having the changes included in the budget bill. Lee told the House of Commons changes to the act and other included changes to the Navigable Waters Protection Act do not appear to have anything to do with economic stimulus, the expressed intent of the budget bill.
“These are complicated pieces of legislation on their own and attempting to update them and modernize them in the context of a stimulus package bill would probably be seen as perverse by some and stupid by others,”
Lee told the Commons. “In any event, the government is either piggy-backing policy changes in this stimulus package or it is doing legislative smuggling by pushing through bills in the back of the ambulance.”
Lee told Law Times he would support severing the act amendments from the budget bill. He added that the changes are so fundamental and sweeping that it is likely that if the Conservative government doesn’t parse the bill, the senate will.
“I believe it could be severed and I believe it should be severed,” Lee says.
Storeshaw says the government welcomes debate on its legislation, but at the end of the day there is no intention to change the bill.
“Due diligence that the budget bill receives in the House of Commons is obviously something that we welcome,” he says. “But we don’t intend to amend the budget implementation bill itself.”
As part of bill C-10, the act will be amended in five key areas. It introduces a dual-track approach to agreements between competitors. The changes provide that bid rigging includes agreements or arrangements to withdraw bids or tenders. It repeals provisions dealing with price discrimination and predatory pricing.
It introduces an administrative monetary penalty for cases of abuse of dominant position. The final key amendment introduces a two-stage merger review process for notifiable transactions, increased merger pre-notification thresholds, and a reduced merger review limitation period.