Barely a year into his tenure, Canada’s newest Competition Commissioner, John Pecman, announced a restructuring of the Competition Bureau, which has historically been divided into four enforcement branches: Criminal Matters, Civil Matters, Mergers, and Fair Business Practices.
Under the realignment, Criminal Matters and Fair Business Practices have combined and will be responsible for all criminal cases including conspiracies, cartels and bid-rigging. Mergers and Civil Matters will also combine, with responsibility for all non-criminal matters, including mergers and non-criminal competitor agreements.
In a mid-2014 press release announcing the changes, Pecman pointed out that the realignment would not reduce the Bureau’s size, but would produce greater synergies and collaboration. The realignment was, he said, “about building a stronger, more flexible and more adaptive agency.”
If the mostly positive reviews of his first year in office are any indication, Pecman stands a good chance of delivering on that promise. As the first commissioner to have risen to the position through the Bureau’s ranks and the first economist to hold the position – his predecessors were all lawyers, as are virtually all his counterparts around the world, including the US – he was bound to come under special scrutiny. But he appears to be passing muster.
“By and large, Pecman is delivering,” says Chris Hersh in Cassels Brock & Blackwell LLP’s Toronto office. “The Bureau’s not perfect under Pecman and it won’t be perfect after his tenure. But he has made the Bureau more predictable and he’s been very accessible to both lawyers and clients.”
The emerging environment represents a marked departure from the sometimes chilly relations that existed with Pecman’s predecessor, Melanie Aitken, now a partner in Bennett Jones LLP’s Washington, DC office.
“There’s a new relationship between the Commissioner and the Canadian Bar Association, what I would call a huge change,” says Brian Facey in Blake, Cassels & Graydon LLP’s Toronto office. “Collaboration had dwindled to a dribble under the previous administration and the relationship became strained, but we’ve rebuilt bridges to the point where we now have members of the Bureau on the CBA’s Competition Section committees and there has been a lot of back and forth.”
The upshot has been that the business community is feeling somewhat more empowered and confident in dealing with the Competition Bureau and competition issues generally.
“The biggest things Pecman has been selling are transparency, accessibility and responsiveness,” says Dany Assaf in Torys LLP’s Toronto office. “Relative to where we were before his appointment, he has definitely delivered.”
Indeed, the Bureau went so far as to formalize its transparency initiative by way of its Action Plan on Transparency. In June 2014, as part of that initiative, the Bureau released its information bulletin on Communication during Inquiries. The bulletin summarizes how and when the Bureau communicates during an inquiry with parties being investigated, industry participants, complainants and the general public. The Bureau also committed to reach out to stakeholders in a year after the bulletin’s release in order to obtain feedback on how the process was working and to make necessary adjustments.
Among the prime beneficiary of these new policies is the merger review process.
“There’s a fresh approach which focuses on getting anything that’s very straightforward in and out of the door quickly,” Facey explains. “Also, the staff is far more engaged and transparent in expressing their concerns about a particular market or product and by way of letting parties in on what’s going on in the Bureau’s mind.”
Otherwise, Pecman’s vision encompasses what he has spoken of as a “new approach” that he calls a “Bureau Without Borders.” He describes the initiative as one where the CB’s reach is not strictly limited by its resources or constrained by international or domestic jurisdictional boundaries. In this vision, shared compliance – the concept that the Bureau, the legal community and the business community share responsibility to promote competitive markets – was central.
The Bureau’s reaction to the Competition Tribunal’s (CT) decision in The Commissioner of Competition v. Visa Canada Corporation and MasterCard International Incorporated testifies to this collaborative approach. The Tribunal ruled that Visa and MasterCard had not engaged in resale price maintenance when they required the operators of their payments systems networks to impose certain conditions on the retail merchants using the networks. The CT reasoned that because what the networks were providing to the merchants was different from what the credit card services provided to the networks, no “reselling” had occurred.
What may be more significant, especially from a policy perspective, is the CT’s observation that even if the allegations had been proven, it would not have issued the order sought by the Commissioner, which would have amounted to a “blunt instrument” requiring constant adjustment in a varied “merchant sector” and “replaced one set of distorted incentives by another.”
Pecman took note. The Bureau decided not to appeal the ruling, hoping instead to “work collaboratively” with Visa, MasterCard and other stakeholders to achieve a result that would be “beneficial to both Canada’s consumers and merchants alike.”
Further evidence of a collaborative approach can be found in the Bureau’s consent agreements with Interac, Agrium, Air Canada, United Airlines, Waste Management, and RCI. The same could be said of the guilty pleas by Hershey in the chocolate conspiracy case, by Yazaki and Furukawa in the motor vehicle components case, by Cathay and LATAM in the air cargo matter, and by JTEKT in the bearings proceedings.
Pecman is also committed to intervening strategically with other regulators and government agencies to raise the profile of competition policy considerations in their decisions.
“There has been a clear, concerted and proactive effort to strengthen relationships and try to infuse competition policy thinking into other regulatory bodies, like the CRTC, as these bodies attempt to come to grips with broader issues,” says Neil Campbell in McMillan LLP’s Toronto office.
One area of particular interest to the Commissioner is the connection between intellectual property and anti-trust. The Bureau has already promised to update its IP Guidelines, which have not been revised since 2001. As well, Pecman wants to address the kinds of issues that have arisen in the US with regard to “pay for delay” or “reverse settlements” between innovators and generics in the pharma industry.
“What we might be hearing is an echo of the federal government’s current ‘consumer first’ message,” says Denis Gascon in Norton Rose Fulbright Canada LLP’s Montréal office.
Another area in which Bureau Without Borders has had an impact is in the treatment of multi-jurisdictional mergers. In early December, 2013, the Bureau issued a No Action Letter regarding Thermo Fisher Scientific Inc.’s acquisition of Life Technologies Corporation, two US multinationals. In approving the merger, the Bureau cited a remedy ordered by the European Commission that required divestiture of certain assets.
“The Bureau had issues on this transaction, but it allowed the US and Europe to be the lead jurisdictions and accepted the global remedy they imposed,” says Facey, who represented Thermo in Canada. “It’s a sign of the confidence that the Bureau has in its own abilities and its willingness to resort to efficiencies of this kind in using its resources.”
Pecman has also shown that he’s not daunted by some recent setbacks that the Bureau has suffered in litigation (like the Visa case and the Chatr case against Rogers), most of them arising from investigations instigated before his appointment. Instead, he has indicated that the Bureau would be more careful about bolstering its cases properly before bringing them.
“John is using some of the older arrows in the toolshed’s arsenal, such as s. 11 [which gives the Bureau wide powers to apply to the Federal Court for oral and document discovery in aid of an inquiry], much more than his predecessor did,” says Paul Collins in Stikeman Elliott LLP’s Toronto office. “For example, in the past the Bureau would likely start an abuse of dominance inquiry with an informal approach to a party, but these days they’re likely to initiate an investigation with a s. 11 order even if a party is willing to cooperate and has no history of non-compliance.”
Indeed, it’s been almost a quarter century since the Bureau resorted, as it has recently, to s. 11 oral discovery in abuse cases. “It’s a bit of an old-school approach,” Collins says. “John genuinely believes that going the formal route at the outset of an investigation fleshes out the issues and so facilitates settlement down the road.”
The formality would also deliver on Pecman’s promised determination to make the Bureau more transparent. “I’ve found him to be quite reasonable in several high-profile cases in which I’ve been involved,” Collins says. “He’s definitely not afraid of litigation, but my sense is that he prefers to work things out.”
Otherwise, many observers are expecting an upswing in criminal prosecutions, especially those involving cartels. After all, it’s been about three years since the cartel provisions were amended to constitute agreements to fix prices as per se offenses, making prosecution and conviction easier by removing the need to prove that such agreements were likely to lessen competition.
“There’s never a shortage of cartels to pursue,” says Anthony Baldanza in Fasken Martineau DuMoulin LLP’s Toronto office. “Given Pecman’s recent heritage on the criminal side and the fact that the Bureau has matured now that it’s gone through a bit of a learning curve regarding the 2010 amendments to the criminal provisions, I think we can expect a fair bit of activity there.”
Doubtless buoyed by the results of its immunity and leniency programs to date, the Competition Bureau adopted a new, more aggressive stance to enforcement with substantial revisions to the programs and by creating a new whistleblowing program, The Criminal Cartel Whistleblowing Initiative.
“The vast majority of criminal cartel and bid-rigging cases that we are investigating have originated with our immunity and leniency programs,” says Jeanne Pratt, Assistant Deputy Commissioner, Criminal Matters Branch. “The new initiatives are intended to build on the huge success of these programs.”
The revisions do not change the main features of the programs. But they do ramp up enforcement policies by, among other things, making it clear that cartels having only indirect sales into Canada are subject to prosecution and therefore fall within the immunity and leniency programs, and by instituting measures aimed at ensuring complete cooperation by applicants.
As it turns out, the new initiative seems to be aimed primarily at individuals whose conduct does not expose them to the risk of prosecution. “Mostly we’re talking about employees of corporations who have evidenced but not participated in an offense,” Pratt explains.
In other words, the new program focuses on innocent parties, encouraging them to provide information by highlighting the protections available and giving them direct contact information. What it does not do is provide positive incentives, like rewards, for innocent people to proffer information. It remains to be seen, then, whether such individuals will be as willing to come forward in cartel cases as have culpable individuals or companies who have opted for the leniency or immunity programs.
As if all this wasn’t enough, Pecman’s appointment came in a year that saw Canadian courts and tribunals produce more significant competition law decisions than ever.
“The two previous years, 2011 and 2012, saw unprecedented levels of enforcement,” says Adam Fanaki of Davies Ward Phillips & Vineberg LLP’s Toronto office. “But from the perspective of competition law jurisprudence, 2013 was unlike any other year.”
Not that Pecman is going to have any trouble understanding or acting on the rulings. With some 30 years at the Bureau as an investigator, manager and executive, including a year as interim commissioner, it’s unlikely that even the most arcane legalities – or any other aspect – of competition law escape him.
“Before his appointment as commissioner, Pecman had been in every other significant role that exists at the Bureau,” says Collins.
Julius Melnitzer is a freelance legal-affairs writer in Toronto.