THE COMPETITOR

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THE COMPETITOR

  1. 1. THE COMPETITOR VOLUME II, NUMBER 4 / DECEMBER 1997 Bill to amend Competition Act gets first reading in Commons Author: The Competition Law Group Word count: 1,811 introduction On November 20, 1997, “An Act to amend the Competition Act and to make consequential and related amendments to other Acts” (the “Bill”) received first reading in the Canadian House of Commons. The Bill is the culmination of an extensive public consultation process which commenced on June 28, 1995 with the release of a government discussion paper regarding proposed amendments to the legislation. The discussion paper raised the prospect of far-reaching amendments, many of which, and arguably the most controversial of which, do not form part of the Bill. For example, the Bill does not propose any changes related to (i) private access to the Canadian Competition Tribunal; (ii) confidentiality and international mutual assistance; or (iii) price discrimination and promotional allowances. An earlier version of the Bill died on the Order paper in the last Parliament. The Bill proposes some significant amendments to the Competition Act (the “Act”), particularly in the context of marketing practices. It is anticipated that the Bill may be passed into law as soon as early 1998. This issue of the Competitor provides a brief summary of the Bill with commentary. This issue also considers the recent report on “whistleblowing” prepared at the request of the Bureau. highlightsof thebill Wire Tapping The Bill proposes to give the Competition Bureau (the “Bureau”) the power to obtain judicial approval for wire taps to investigate price fixing, bid rigging and deceptive telemarketing cases. Technically, this is to be done by amending section 183 of the Criminal Code (the “Code”) to
  2. 2. -2- include conspiracy, bid rigging and deceptive telemarketing as offences for which wire taps may be authorized. The general prohibition against wire tapping is contained in subsection 184(1) of the Code, which provides that “every one who, by means of any electro-magnetic, acoustic, mechanical or other device, wilfully intercepts a private communication is guilty of an indictable offence and liable to imprisonment for a term not exceeding five years”. The Code does allow an agent of the state to seek authorization to intercept communications in two situations: (i) where either the originator of the communication or the person intended by the originator to receive it has consented to the interception; or (ii) where no such consent is given. In either case, however, the authorization of a judge of a provincial criminal court of superior jurisdiction is required to intercept a private communication. In addition, all applications for judicial authorization must be supported by an affidavit sworn on the information and belief of a peace marketing” with the exception of increasing the maximum fine in respect of summary conviction proceedings from $25,000 to $200,000, per offence. The Civil Regime - Deceptive Marketing Practices The Bill proposes a new civil regime (Part VII.1) to address most instances of misleading advertising and deceptive marketing practices currently prosecuted in the criminal courts by the Attorney General of Canada. The types of representations which are currently proscribed by subsection 52(1) of the Act would become reviewable matters, and not criminal offences. The Bill provides clarification in the highly controversial area of “ordinary price” representations. It is proposed that “ordinary price” representations would involve a volume and time based test. That is, in determining whether a price representation was misleading, the Director would consider whether (i) a substantial volume of the product had been sold at that price or a higher price within a reasonable period before or after the making of the representation; and (ii) the product had been offered at that price or a higher price for a substantial period of time recently before or immediately after the making of the representation. Administrative Remedies Civil misleading advertising would be reviewable, upon application by the Director, by the Competition Tribunal, the Federal Court - Trial Division, or the superior court of a province. The orders contemplated by the Bill would include (i) cease and desist orders; (ii) orders requiring the publication of information notices; and (iii) civil monetary penalties. The latter two orders are available in the absence of due diligence. Unless otherwise specified by the court, a cease and desist order would have a duration of ten years. provision, that person would be guilty of an offence and liable (i) on conviction on indictment, to a fine in the discretion of the court or to imprisonment for a term not exceeding five years or both; or (ii) on summary conviction, to a fine not exceeding $200,000 or to imprisonment for a term not exceeding one year or both.
  3. 3. -3- The Bill also proposes an amendment to Section 33 of the Act to provide for interim injunctions prohibiting the supply of products which may be used for deceptive telemarketing to anyone previously convicted of the offence. Also, as noted above, deceptive telemarketing is one of the offences for which a wire tap may be sought. Pre-Merger Notification The Bill proposes a number of changes to the pre-merger notification regime. First, a power has been granted to the Director or a person authorized by the Director to waive the requirement to notify. Second, the scope of exempt transactions to prenotification has been expanded to a small degree. Third, the issue of who has the obligation to prenotify has been clarified to apply to “the parties to the proposed transaction”. Also, it is proposed that the Director be granted the power to require the target of a hostile takeover to provide a pre-merger notification filing within a stipulated time to ensure that such a target could not use the prenotification process to hold up a transaction. Fourth, while the Bill proposes to preserve the discretion for parties to choose between a short and long form filing, the statutory waiting periods related to each would be extended significantly. Specifically, it is proposed that the short and long form filing waiting periods be extended from seven and twenty-one days, respectively, to fourteen and forty-two days, respectively. Fifth, the specific information required in the context of a short or long-form filing will be stipulated in amended regulations related to pre-notifiable transactions. A draft of those regulations, issued for public consultation, confirms that considerably more information related to customers and suppliers will be required. Prescriptive Orders The current section 34 provides only for prohibition orders. The Bill introduces prescriptive orders under the amended section 34, i.e. orders which mandate the taking of “...such steps as the court considers necessary to prevent the commission, continuation or repetition of the offence...” or to take any steps agreed to by the government and the person in question. The duration of a prohibition or prescriptive order would be ten years unless a shorter period was specified. The Bill also sets out the circumstances where orders under this section may be varied or rescinded. The Director The Bill will change the official title of the “Director of Investigation and Research” throughout the Act to the “Commissioner of Competition”. The Bill explicitly states that it is the Commissioner who is responsible for the administration and enforcement of the Act.
  4. 4. -4- In addition, the Bill proposes that temporary cease and desist orders would be available where, on application by the Director, a court or the Tribunal finds (i) a “strong prima facie” case that a person is engaging in deceptive marketing practices (ii) serious harm is likely to ensue unless the order is issued; and (iii) the balance of convenience favours issuing the order. Unless agreed to by the person against whom the temporary order is sought, such an order would have a duration no greater than 14 days. The Bill also proposes a mechanism for consent orders related to deceptive marketing practices. Specifically, where application for an order is filed on consent, the order agreed to may be filed with the court for immediate registration. The Bill does not contemplate a review function for the Tribunal or the court. Deceptive Telemarketing The Bill also introduces a new criminal provision related to deceptive telemarketing. “Telemarketing” would be defined to mean the use of “interactive telephone communications” for the purpose of promoting a product or business interest. Generally speaking, this provision would make it an offence not to provide reasonable and fair disclosure. However, no person would be convicted under the criminal deceptive telemarketing provisions where it could be established that due diligence had been exercised to prevent the commission of the offence. It is particularly noteworthy that the Bill contemplates circumstances where officers and directors of a corporation engaged in deceptive telemarketing would be subject to personal liability. In terms of penalties, if a person is found to have contravened the criminal deceptive telemarketing Control of Partnership Currently, the Act is silent in respect of determining control of a partnership. It is proposed that for purposes of the Act, a person would “control” a partnership where such person was entitled to receive more than fifty percent of the profits of the partnership or more than fifty percent of its assets upon dissolution. significantexclusionsfromthebill Private Party Access to the Competition Tribunal One of the more controversial aspects of the package of amendments initially proposed by the Director in June, 1995 was a proposal to allow private party access to the Competition Tribunal in reviewable matters, with the exception of mergers. In May, 1996, the Director announced that private access would not be included in the current package of amendments, but would instead be the subject of further study. The Director released a study prepared for the Bureau by Professors Michael Trebilcock and Kent Roach, of the Faculty of Law of the University of Toronto. The study expresses the view that there should be private access to the Tribunal in order to supplement public enforcement of the Act, and as a means of holding the Director accountable for decisions not to prosecute. The study recommends that in order to deter frivolous or improperly motivated actions, there should be a mandatory summary judgment procedure, together with possible cost sanctions.
  5. 5. -5- Private access to the Tribunal is not part of the current package of amendments, but it is clearly not a dead issue. We expect that the issue will be raised by the Director as part of the next round of proposed amendments to the Act, whenever that takes place. Confidentiality and International Mutual Assistance As noted above, for the time being, there will no amendments relating to confidentiality and international mutual assistance. This is largely a result of the decision of the Federal Court (Trial Division) in Schreiber v. Attorney General of Canada, to the extent that requests for assistance from foreign law enforcement agencies require prior judicial authorization. The amendments contemplated by the Director would not have required prior judicial authorization of requests for foreign legal assistance. In light of the Schreiber decision, and the pending appeal which may clarify what is constitutionally required, it was decided that amendments to the Act in this context were premature.

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