When bigger isn’t better

As it stands now, this country’s competition rules are - how can we put this? - a farce.

Canadian Business magazine
November 26, 2001

When bigger isn’t better
It’s time for Ottawa to rethink Canada’s competition laws
Jason Kirby

Dave Collins, vice-president of Wilson Fuel Co.—a midsize Halifax furnace oil and gasoline outfit—has a big problem with Canada’s competition rules. For seven years, he’s argued the odds are stacked against small suburban Halifax stations to compete with a new Petro-Canada gas bar across the road, the Calgary-based giant quickly retaliated, driving down the price of its premium and regular gas to lower than cost. Wilson Fuel really only had two options: roll over or ask the federal Competition Bureau to take the matter to the quasi-judicial Competition Tribunal. “Without even sending anyone out from Ottawa to investigate, they said, ‘Competition can be tough, Mr. Collins,’ and that was that,” he says. After losing $5,000 a day for two weeks, Wilson Fuel upped its prices. Industry giants: one. Consumers: zero.

Things haven’t changed much since. More than a year and a half after WestJet Airlines Ltd. filed a complaint with the Competition Bureau accusing Air Canada of predatory pricing, the Tribunal gave the larger carrier a six-month reprieve in October to deal with its miserable finances. Gotta wonder if the case will ever go ahead now.

Might things have been different if Wilson Fuel or WestJet had been able to go straight to the Tribunal? That’s a question Collins has asked himself—as well as the parliamentary committee studying whether to allow companies and individuals private access to the Tribunal. The industry committee is currently reviewing Bill C-23, written to plug gaping holes in Canada’s competition laws. But it is also proposing a private access amendment. There’s no guarantee it will go through—and there are a lot of big players who’d like to see it doesn’t.

As it stands now, this country’s competition rules are—how can we put this?—a farce. Say you’re a small grocery chain and you’re being squeezed by a much larger firm with a monopoly in your industry. Maybe the big guys control your suppliers, or they’re trying to drive you out of business by selling their products way lower than cost. You complain to the Competition Bureau, which studies your accusations to decide if the case should be sent to the Tribunal. Most times—about 97% of the time, in fact—that never happens. The Bureau is understaffed, underfunded and, as the Organization for Economic Co-operation and Development charged in a draft report leaked in October, under the thumb of the industry minister. If companies can take their cases directly to the Tribunal, the thinking goes, there’s more chance anticompetitive practices will be curbed. Good for the little guy. Even better for consumers.

The private access amendment has been spearheaded by Dan McTeague, a Liberal MP from Pickering-Ajax-Uxbridge. “The Competition Act, next to fiscal policy, is probably the most important weapon at the hands of the government,” he says. “It’s time for Canada to get on the ball and provide its business community with something of an equal footing with what happens elsewhere around the world.” Like the US, Ireland, France and Australia.

Not surprisingly, the biggest companies in Canada have lined up to oppose private access. The Canadian Chamber of Commerce was first to express serious concern that companies will misuse the Tribunal for frivolous and strategic litigation to tie up their competitors, something president and CEO, Nancy Hughes Anthony, says happens often in the US, where civil courts can award huge damages in competition cases.
There’s also the concern that private access will throw a chill on investment by US firms. Hughes Anthony wants to see the bill pass as is—and then debate private access later. “This isn’t the right time for this,” she says. “It’s a bigger discussion than just give companies access and all their problems will be solved.”

Then there’s the Competition Policy Group, made up of big names like—you guessed it—Air Canada, Petro-Canada, General Electric Canada, Imperial Oil and Nortel. In an early-November report, it claimed private access will cost taxpayers between $137 million and $419 million a year.

Quite the opposite appears to be the case in Australia, where private access has existed since 1974. Now, to be fair, the Australian system uses civil courts rather than a federal Tribunal. But Allan Fels, chairman of its Competition and Consumer Commission—who recently gave evidence to the Canadian parliamentary committee by teleconference—argues we should let companies file cases themselves, rather than get the Bureau involved. “We don’t believe it’s good use of public resources to be involved in some of these cases,” he says. “If they were not private actions, we would face the dilemma of whether to spend large amounts of public money protecting the interests of big businesses.” Plus, and here’s the key, “the threat of litigation keeps big business on their toes.”

That’s not to say big business always gets hammered. Of the 100 cases launched every year in Australia, 70% are settled out of court. Of those that go through to judgment, only a slim majority see the complainant win. We should take a cue from the Aussies. It’s in tough times like these—when upstarts are struggling to even survive—that predators have been known to corner the markets. Without free and open competition now, we’ll all pay more later.

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