OECD blasts Competition Bureau

Canada's Competition Bureau is plagued by an inconsistent policy framework, hampered by national monopolies, undercut by a lack of resources and tainted with a reputation for having no independence, says a draft report by the Organization for Economic Co-operation and Development.

The Globe and Mail
October 20, 2001

OECD blasts Competition Bureau
Heather Scoffield

OTTAWA — Canada's Competition Bureau is plagued by an inconsistent policy framework, hampered by national monopolies, undercut by a lack of resources and tainted with a reputation for having no independence, says a draft report by the Organization for Economic Co-operation and Development.

The confidential report, obtained by The Globe and Mail, says the bureau appears to be subordinate to the deputy minister of Industry Canada, who is responsible for promoting industry and policing it.

"There is a common perception that important decisions have been subjected to political pressures to protect 'national champion' interests," the report says.

"The desire to retain Canadian control in some sectors limits what competition policy can do to remedy problems, which leads to tolerating monopolies subject only to ad hoc measures to regulate them."

The report recommends that the bureau should be turned into a stand-alone agency, reporting to Parliament through the Industry Minister, but responsible for its own finances and personnel.

Such independence would help change the perception that bureau decisions are subject to political influence.

The bureau itself agrees with many of the OECD criticisms, said assistant commissioner Sally Southey. However, the onus is on Prime Minister Jean Chrétien to make the changes required to give the bureau more independence, she said.

"It's a machinery of government issue. That's the prerogative of the Prime Minister," she said yesterday.

The report also states that laws that require Canadian ownership and control in several sectors — especially airlines, banks and bookstores – have prevented competition policy from dealing adequately with issues such as market power and monopoly.

Also, inconsistency in the application of competition policy has increasingly become a public issue, the report adds. In order to protect itself from the influence of the U.S. economy, Canada has at times "tolerated local market power, entry controls, industry co-operation and protection of national firms at the expense of national consumers."

Enforcement has been sporadic, and a lack of major victories by the bureau has led to the perception that powerful companies can prevail over it, the paper says. While Canada's competition law seems to be tough, providing criminal penalties, such penalties are rarely imposed — making the law seem toothless.

As for resources, the OECD says the bureau is underfunded and does not have the expertise or personnel to bring forward solid cases in a timely manner. The bureau can't maintain more than one major case at a time, especially since it often has to hire private sector lawyers to fight its cases. A lack of resources and experience also hurts the bureau's ability to enforce the competition law, the report says.

The OECD recommends that Ottawa increase the bureau's budget by 50 per cent or $15-million.

The Competition Tribunal faces its own problems, the report says. (The Tribunal acts as a quasi-judicial body, making decisions if a company disagrees with a bureau recommendation and wants to challenge it.)

"Its processes have suffered from delay, cost and uncertainty," the report says. "It is becoming a secondary player compared to the [Competition] Commissioner and the bureau."

The OECD recommends that the tribunal be completely re-examined.

The OECD praised the bureau for holding back on approving bank mergers until a clear regulatory structure could be set up. But the organization scolded Canada for creating a regulated monopoly airline.

Much of the criticism from the OECD reflects comments heard from the private sector in Canada, during continuing hearings at the House of Commons Industry Committee into amendments to the Competition Act.

The Canadian Chamber of Commerce also argues that the bureau is underfunded, and often "hamstrung" by government policies such as legislating an airline monopoly and approving bank mergers, said chamber president Nancy Hughes Anthony.

The chamber also believes the bureau's criteria for proving criminality are too tough, making it difficult for the bureau to bring cases successfully forward. So, the chamber wants the bureau to decriminalize predatory pricing and a few other areas to make its enforcement more effective, Ms. Hughes
Anthony said.

The bureau should also create a fast track for small and medium-sized businesses, so that they can make better use of Canada's competition rules without having to spend thousands of dollars on lengthy legal processes, she added.


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