Submitted by the OAS Trade Unit to the FTAA Working Group on Competition Policies

Canada: Report on Developments and Enforcement of Competition Policy and Laws
April 1, 1995 to March 31, 1996 (Continued)

III. Regulatory and Trade Policy Matters

Within the Bureau, economists of the Enforcement Economics Division provide advice and analysis regarding economic issues in a number of enforcement areas, including cases, interventions and enforcement policy. Internal economists help develop the economic theory of the case at hand; assist officers within the Branches in analysing the importance of particular evidence given the theory of the case; and, assist in preparing for litigation before the courts or Competition Tribunal. A similar role is played in respect of interventions before regulatory bodies. In total, Branch economists were involved in some 40 cases and regulatory interventions over the fiscal year. In one of these interventions, a Branch economist appeared as an expert witness for the Director of Investigation and Research. Economists were also called upon to help in the analysis, development and implementation of enforcement policies for the Bureau as a whole, and in reviewing any requirements for legislative reform.

Issues raised by network economics, particularly in respect of telecommunications, were an important area of research and policy development over the course of 1995/96. In particular, the Bureau hosted the Telecom and Antitrust Symposium which brought together leading antitrust, economic and telecommunications experts to reflect on competition policy and regulation. The discussions also stressed the importance of network economies and vertical integration issues for competition policy's application to the telecommunications sector.

Independent economic research continues to form an integral part of enforcement economics within the Bureau. To maintain and enhance internal economists' credibility, economists are encouraged to present research papers at outside seminars and conferences, to collaborate on research projects with outside academics and to submit papers and research to journals for publication. Internal working papers and other less formal contributions which develop and clarify Bureau internal policies are also encouraged. Economists within the Bureau undertook research in a number of areas; including, the empirical analysis of past resale price maintenance cases, exclusive contracting, and horizontal concentration in the central Canadian cement industry.

In the area of regulatory interventions, the electricity sector was an important focus of the Bureau's competition advocacy work during the year. The Bureau participated in two major reviews of the scope for pro-competitive reforms that were conducted at the provincial government level: the British Columbia Utilities Commission Electricity Market Structure Review, mentioned in last year's report; and a subsequent in depth study by an ad hoc Advisory Committee on Competition in Ontario's Electricity System. In its submissions to these review bodies, the Bureau put forward a case for major market-opening reforms as the most effective means for ensuring efficient and low-priced electricity supply in the respective provinces.

The Bureau's submissions incorporated a number of recommendations relating to elements of market structure and regulation in the electricity sector. These pertained to such matters as: (i) the structural requirements for effective competition among generators; (ii) the potential adoption of competition at the retail distribution level; (iii) the appropriate relationship between regulation and competition law disciplines; (iv) ways to ensure competing electricity suppliers of equal access to transmission and distribution facilities; and (v) mechanisms for ensuring the reliable and efficient operation of electricity systems under competition.

The report of the B.C. Utilities Commission, released in September 1995, endorsed key views expressed in the Bureau's submissions. In particular, it supported the adoption of wholesale competition where generators would compete to supply distribution utilities. Under this market structure, a competitive power pool would be created into which generators would bid electricity, generation assets would be transferred to separate corporations from those holding transmission and distribution assets, and B.C. Hydro's generating assets, where feasible, would be divested. The report of the Advisory Committee on Competition in Ontario's Electricity System was released in July 1996. It put forward detailed recommendations for implementing competition in the provincial electricity industry, initially at the wholesale and subsequently at the retail level of the market. The Committee's recommendations are currently being studied by the responsible Ministry of the provincial government, the Ministry of the Environment and Energy.

IV. International Affairs

Internationally, the growing number and complexity of cross-border cases, especially with the U.S., highlight the international dimensions of the Bureau's enforcement activities and underline the need for enhanced international cooperation, consultations, coordinated enforcement actions where appropriate, and conscious efforts at dispute avoidance. As part of regular bilateral consultations, the Director and Bureau officials met with the Assistant Attorney General, United States Department of Justice, Antitrust Division, and the Chairman of the Federal Trade Commission, twice during the year. The discussions focused on ways and means to enhance bilateral cooperation on enforcement matters within the framework of the Mutual Legal Assistance Treaty and the 1995 Canada-US Agreement on the Application of their Competition and Deceptive Marketing Practices Laws.

Bilateral meetings were also held during the year with the Directeur Général of France's Direction générale de la Concurrence, de la Consommation, et de la Répression des Fraudes (DGCCRF), the President and other officials of Mexico's Comisíon Federal de Competencia, the Director General and other senior officials of the UK's Office of Fair Trading, the head of the Directorate General IV in the European Union (responsible for competition policy in the European Union), and with competition officials from Japan, Venezuela and Chile. In these meetings, matters of bilateral interest, including the desirability and feasibility of enhanced cooperation between the respective competition authorities, were discussed. Discussions are also continuing on developing a Canada-European Union competition accord on cooperation and coordination.

At the case level, there was growing number and complexity of notifications and requests for assistance and other interactions between the Bureau and foreign competition authorities. During the fiscal year, the Bureau received 23 notifications from foreign competition authorities and sent 9 notifications to foreign authorities or governments under the Canada-US Agreement and the Revised OECD Recommendation. The majority of the notifications were with the United States.

Pursuant to the North American Free Trade Agreement (NAFTA) Chapter 15, Article 1504, the Working Group on Trade and Competition met twice during the year, in Ottawa on September 21, 1994, and in Mexico City on March 27-28, 1995. The Working Group continued its on-going work on examining the interrelationship between trade and competition policy within the framework established by the provisions of the NAFTA. During 1994-95, the Bureau also monitored and contributed to the discussions on the role of competition policy in trade liberalization within the emerging Asia Pacific Economic Cooperation (APEC) area, the Free Trade Area of the Americas (FTAA), and several emerging sectoral agreements such as those on telecommunications , energy and investment. Multilaterally, the Bureau continued to participate actively in the work of the OECD's CLP and Trade Committees, focussing on the interrelationship between trade and competition policies, on competition and regulation and on international cooperation. As well, it participated actively in the Intergovernmental Group of Experts on competition policy of the United Nations Conference on Trade and Development (UNCTAD). The Bureau has also been providing technical assistance for many years, both bilaterally and in support of UNCTAD and OECD multilateral programs. During the past year, technical assistance was provided to Venezuela, Vietnam, China, Malaysia, Ukraine, Lithuania, Latvia, and Estonia.

STATISTICAL ANNEX

1. Refers to six-resident application to the Director for inquiry.

1. Examinations in 1992-93 and years prior were defined by 2 or more days of review. In 1993-94 and 1994-95, only matters which warranted further review based on case screening criteria adopted by the Branch were recorded as examinations.
2. Refers to six-resident application to the Director for inquiry.
3. Alternative Case Resolutions include; investigative visits, orders on consent and written undertakings.
4. May include matters referred during previous years

1. Includes notifiable transactions, advance ruling certificate requests and examinations commenced for other reasons. Some examinations commenced may arise from notifications and advance ruling certificate requests in relation to the same transactions.
2. Includes advance ruling certificates and advisory opinions issued and matters which have been concluded or withdrawn before the Competition Tribunal.
3. Included in "Total examinations concluded".