The case for private competition initiatives

In the end, it is difficult, if not impossible, to defend a public monopoly on the enforcement of competition laws whose central raison d'tre is redressing the evils of private monopoly.

The Financial Post
December 3, 2001

The case for private competition initiatives
The argument against private enforcement of Canadian competition law is threadbare. It would supplement efforts of public authorities
Michael Trebilcock

The role for private enforcement of Canadian competition laws has been extensively debated since 1969, when the Economic Council of Canada's report on reform of Canadian competition laws proposed civil actions to supplement public enforcement efforts. Over the intervening 30-plus years, civil actions have been introduced only for criminal offences (e.g. price-fixing). Since the enactment of the Competition Act in 1986 and the creation of the Competition Tribunal that year, the Competition Tribunal, which deals with non-criminal cases, has heard only four contested merger cases, four contested abuse of dominance/exclusive dealing cases, two refusal to supply cases and one contested variation of a consent order — fewer than one contested case per year.

The House of Commons Industry Committee is currently considering amendments to the Competition
Act, one of which would permit private parties to initiate complaints before the Competition Tribunal, as well as the Commissioner of Competition, concerning reviewable practices that may entail exclusive dealing, tying, market restrictions and refusal to supply, but not mergers or abuse of dominance. These private complaints would be subject to the Tribunal's ability to award costs against an unsuccessful party if it considers the party's claim to be frivolous or vexatious and to order a summary judgment against a party who cannot prove a prima facie case. The only relief that would be available to private parties, as with applications by the Commissioner, would be injunctive forms of relief (cease and desist orders), but not monetary compensation or damages.

It is these proposals that William Rowley, a lawyer who practices in the competition field, recently attacked in the Financial Post. Throughout the 30-year period of debates, in fact, Mr. Rowley and a small number of mostly large multinational companies have consistently opposed all efforts to provide any form of private enforcement. As a matter of good public policy, contrary to what Mr. Rowley's clients believe to be in their own best interests, the case against private enforcement of Canadian competition laws is threadbare.

As Judge Jerome Frank, a famous U.S. Court of Appeals judge, pointed out many years ago, private enforcement of laws entail enlisting citizens in the enforcement of laws as "private Attorneys General." Judge Frank took the view that the initiative of private litigants in many areas of the law could usefully supplement the enforcement efforts of public authorities. Indeed, we observe across the entire legal landscape private enforcement of laws complementing public enforcement of the same laws. For example, criminal assault may also give rise to a tort action for assault and battery. Deceptive advertising practice may give rise to a criminal prosecution and a private action for breach of contract or damages or other remedies for violation of provincial unfair business practice laws. A misleading prospectus or insider trading may give rise not only to criminal or administrative penalties but also to civil actions for damages. Violations of environmental laws or regulations may give rise to criminal or administrative penalties and civil actions for damages. In the competition or antitrust area, in a recent report prepared for the Canadian Competition Bureau, Jack Roberts, professor emeritus at the University of Western Ontario Law School, surveyed a number of competition law regimes in industrialized countries and found that every one of these regimes, with the sole exception of Canada, provides some form of private party redress for reviewable practices.

The arguments for complementing public enforcement efforts with private rights to initiate complaints are straightforward. First, private enforcement may be superior to public enforcement in compensating those aggrieved by violations and achieving corrective justice, principally in the form of compensation for actual losses incurred, but also in correcting the harm for the future that the plaintiff is suffering from the violation. Second, private enforcers may in some instances be at a comparative advantage to their public counterparts. Because they may be directly affected by the matter, they may have a greater incentive to take enforcement action. Closer proximity to the violation may also reduce the costs of detecting possible violations and gathering evidence. As well, adding private resources to enforcement efforts will likely add to the jurisprudence defining and fleshing out the general standards contained in the laws being enforced. Finally, the private attorney general theory recognizes possible failures of public enforcement. Public enforcers may be interested in maximizing their own budgets or political support in enforcing the law or they may become captured or unduly influenced by vested interests.

Private actions serve an important check and balance in the larger law enforcement system. Relatedly, private enforcement also serves to hold public enforcers accountable for decisions not to prosecute by allowing critics to put their money where their mouth is and assume for themselves the role of public prosecutors.

While these advantages of private enforcement of laws, including competition laws, are substantial, I recognize that the right of private action carries a risk of abuse, such as strategic harassment of competitors for private ends that are antithetical to the public policy rationales for the laws. This concern rightly warrants caution in structuring and confining private rights of action in terms of the remedies available, the cost rules applicable to the bringing of unsuccessful claims and summary judgement procedures to terminate unmerited claims at an early stage.

The proposed amendments to the Competition Act are a model of caution — even of excessive caution.
In my view, private rights of action should extend at least to abuse of dominance position, and they should provide for monetary compensation in the form of single damages for reviewable practices found by the tribunal to violate the act. While injunctive relief may provide relief to the plaintiff in the future, he may have sustained past losses from the practice in question. What is the case for requiring him, if his claim is vindicated, to bear these losses and not the defendant, whose practices have been found by the tribunal to be in violation of the act and to have caused the losses in question?

These proposals should be contrasted with the private antitrust enforcement regime in the U.S., which provides for treble damages, contingency fees, one-way cost rules, expansive class action rules and civil jury trials. Mr. Rowley's attempt to analogize the current Canadian proposals to the U.S. regime is a total red herring, even though many of his clients seem not only to survive but to thrive in the U.S. economy, whose performance in most respects we envy.

In the end, it is difficult, if not impossible, to defend a public monopoly on the enforcement of competition laws whose central raison d'tre is redressing the evils of private monopoly.

Michael Trebilcock is a professor of law and economics at the University of Toronto's Faculty of Law.

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