Canada: Competition Bureau

The Competition Bureau’s (Bureau) legislated mandate is to help the Canadian marketplace be more competitive and innovative for the benefit of businesses and consumers. We are committed to doing so through all means available, from law enforcement to competition promotion.

2014–2015 was a year of success and change for the Bureau. We applied an integrated, whole-Bureau approach to build trust and promote confidence with our stakeholders, and increase compliance with our legislation, making best use of the full set of tools at our disposal. We also increased our competition promotion efforts while aligning with Canadian government priorities. Within the Bureau, our team worked even more closely to increase synergies and efficiency.

Our 2014–2015 Annual Plan set out the four priorities pursued by the Bureau as we continued our efforts to ensure that Canadians benefit from a competitive and innovative marketplace:

•   We applied effective and integrated enforcement and administration our legislation, concluding 49 investigations and securing more than C$25 million in combined fines, administrative monetary penalties (AMPs) and consumer restitution for cartel conduct, abuse of dominance and deceptive marketing.

•   We increased competition promotion efforts to advance a culture of compliance and competition advocacy, completing two markets studies and making nine representations to regulators (up from three the previous year).

•   We aligned and delivered on government of Canada priorities, complementing the government’s consumer agenda. This work included supporting the government’s focus on increased competition in the wireless industry, completing a market study on the propane industry and active enforcement of Canada’s Anti-Spam Legislation.

•   We increased organisational synergies through our people, planning and systems, implementing more integrated business processes and more effectively leveraging the diverse skills sets of our employees to ensure fair, healthy competition in Canada.

Competition enforcement

The Bureau performed a tremendous amount of enforcement work in 2014–2015 to benefit Canadians. We received several important court decisions, obtained significant fines in criminal cases, secured significant penalties and restitution in deceptive marketing practices cases and resolved numerous complex mergers.

Our year in numbers:

•   Total investigations and examinations commenced increased from 270 in 2013–2014 to 306 in 2014–2015 – an increase of more than 13 per cent.

•   Total investigations and examinations concluded increased from 261 in 2013–2014 to 293 in 2014–2015 – an increase of more than 12 per cent.

•   We made greater use of formal powers in non-merger cases. The number of section 11 orders issued increased from seven in 2013–2014 to 19 in 2014–2015 – an increase of more than 170 per cent. Similarly, the number of search warrants issued increased from 35 in 2013–2014 to 42 in 2014–2015 – an increase of 20 per cent.

•   We obtained increased AMPs and restitution. AMPs increased from C$500,000 in 2013–2014 to C$10 million in 2014–2015 and restitution increased from nothing in 2013–2014 to C$1.69 million in 2014–2015.

Criminal enforcement

Agreements to fix prices, allocate markets, restrict output or rig bids result in higher prices for consumers. Pursing these types of agreements is a top priority for the Bureau. In September, DENSO Corporation (DENSO), a Japanese supplier of motor vehicle components (MVC), pleaded guilty to three counts of bid rigging under the Competition Act (Act) and was fined C$2.45 million by the Ontario Superior Court of Justice (OSCJ) for its participation in an international bid-rigging conspiracy. Evidence shows that DENSO conspired with other Japanese MVC manufacturers to coordinate their respective responses and to agree on which party would win bids submitted in response to requests for quotations to supply Toyota Motor Manufacturing Canada Inc with certain MVC. Similarly, on 11 December 2014, Yamashita Rubber Co, Ltd (Yamashita) pleaded guilty to two counts of bid rigging under the Act for its participation in an international bid-rigging conspiracy and was fined C$4.5 million by the OSCJ. The evidence further showed that Yamashita conspired with another Japanese supplier of MVC to rig bids for anti-vibration components and systems sold to Honda. Since April 2013, the Bureau’s investigation involving MVC has resulted in seven guilty pleas and over C$56 million in fines imposed by the courts.

We continued to send a clear message that price-fixing activities will not be tolerated in Canada with our gasoline price-fixing investigation. Following a lengthy criminal trial before the Quebec Superior Court (QSC), Pétroles Global was found guilty of fixing the price of retail gasoline in three local markets in Quebec. On 17 April 2015, it was fined C$1 million for its role in a price-fixing conspiracy. To date, 33 individuals and eight companies have pleaded or were found guilty with fines totalling over C$4 million. Of the 33 individuals who have pleaded or were found guilty, six have been sentenced to terms of imprisonment totalling 54 months.

In March 2015, Rogers Communications Inc (Rogers) agreed to pay up to an estimated C$5.42 million in refunds to wireless consumers who were victims of deceptive marketing of Premium Text Messaging services – the largest refund obtained to date as part of a Bureau settlement. As part of the settlement, Rogers also agreed to cease billing for premium text messaging services unless the customer has approved the charges; create a Consumer Awareness Campaign designed to educate its customers about how charges can be incurred on their wireless devices and the steps they can take to avoid unwanted charges, including safety tips for online purchases; and enhance its corporate compliance program with respect to billing customers on behalf of third parties. This agreement is the result of a Bureau investigation which concluded that Bell Canada (Bell), Rogers and TELUS Corporation (Telus), in conjunction with the Canadian Wireless Telecommunications Association (CWTA), facilitated the sale to their own customers of premium-rate digital content for fees that had not been adequately disclosed. Customers were misled into believing this content was free. The legal proceedings against Bell, Telus and the CWTA remain ongoing.

In the past year, the Bureau also worked to secure more than C$185,000 in restitution for approximately 1,500 victims of an online job opportunity scam in more than 60 countries operated by Matthew Hovila of Edmonton, Alberta. In June 2013, Mr Hovila was found guilty under the Act of making materially false or misleading representations with respect to finding employment in the oil and gas industry on his former website and of contravening a consent agreement registered with the Competition Tribunal (Tribunal). He was sentenced to 15 months in jail for contravening the criminal false or misleading representations provisions of the Competition Act and an additional 15 months in jail for breaching a court order. This was the Bureau’s first conviction for the contravention of a registered consent agreement.

Civil enforcement

Businesses operating in the digital economy must realise that anti-competitive activity will not be tolerated, regardless of whether it occurs in the physical or digital world. In February 2014, the Bureau took action to promote competition for ebooks. Following an 18-month investigation into the Canadian e-books market, the Bureau reached a consent agreement with four major e-book publishers. As part of the consent agreement, the four publishers agreed to remove or amend certain clauses in their distribution agreements with individual e-book retailers, which is expected to benefit Canadian consumers through lower e-book prices. Kobo, the largest e-book retailer in Canada, is currently challenging the settlement with the four major publishers on the grounds that the settlement directly affected Kobo as a third party. The settlement has been stayed pending the challenge. The Bureau subsequently filed a reference case asking the Tribunal to determine the nature and scope of its jurisdiction over consent agreements under the Act. The Tribunal issued its decision on the reference in September 2014, which provided clarity as to what factors it will consider when reviewing third-party applications to rescind or vary a consent agreement. The Tribunal’s decision was upheld by the Federal Court of Appeal (FCA) in June 2015.

The Bureau also received positive appellate jurisprudence for its interpretation of the Act in the context of its case against the Toronto Real Estate Board (TREB), the largest real estate board in Canada. The Bureau’s application to the Tribunal sought to prohibit TREB’s rules that restrict how its member agents provide information to customers and deny agents the ability to introduce new and innovative real estate brokerage services using the internet. The Tribunal originally ruled that TREB, as an incorporated trade association, does not compete with its own members in the real estate brokerage market and therefore cannot be found to have contravened the abuse of dominance provision. In February 2014, the FCA overturned the Tribunal’s decision, stating that the Tribunal misinterpreted the abuse of dominance provisions of the Act. The matter is scheduled to be re-heard on its merits in September 2015.

In November 2014, the Bureau reached an agreement with Medtronic Inc (Medtronic), Canada’s largest supplier of insulin pumps for diabetic patients, which requires the company to cease practices limiting competition and restricting consumer choice. Following an investigation, the Bureau raised concerns that Medtronic included restrictive terms in the warranty for one of its popular insulin pumps that limited the ability of rival companies to supply competing products. Medtronic agreed to revise its warranty terms and to advise customers about the revisions.

The Bureau also worked to protect competition and consumer choice in the residential water heater industry. First, the Bureau reached resolutions with Reliance Comfort Limited Partnership (Reliance) and EnerCare Inc (EnerCare) regarding alleged anti-competitive water heater return policies and procedures. These resolutions ensure that consumers are no longer subjected to these policies and practices by either Reliance or EnerCare. Reliance was also ordered to pay an AMP of C$5 million – the first ever AMP under the Act’s abuse of dominance provision. Second, the Bureau cleared Reliance’s acquisition of National Energy Corporation (National) a significant competitor with respect to water heaters and other home ventilation and air conditioning products in Ontario. The Bureau concluded that this transaction was unlikely to result in a substantial lessening or prevention of competition owing to, among other things, the consent agreement that Reliance had reached with the Bureau in the abuse of dominance matter. Finally, the Bureau reached resolutions with National and Just Energy Group Inc following an investigation into false or misleading door-to-door water heater promotions. This remedy included an AMP of C$5 million and restitution of C$1.5 million to all current National customers obtained through door-to-door marketing since July 2008 in the form of a direct credit on their water heater rental bills. National was also required to appoint an independent compliance monitor – the first time this has occurred in a non-merger case.

The Bureau’s work in the water heaters industry continues as the Tribunal issued a decision allowing the Bureau to move forward with its case against Direct Energy Marketing Limited (Direct Energy). The Bureau is seeking an AMP of $15 million and an order prohibiting Direct Energy from engaging in anti-competitive water heater return policies and procedures in the future. This decision is an important development, as it means that the Bureau can proceed with an abuse of dominance application even if the entity alleged to have abused its dominant position has exited the market. Direct Energy has appealed the Tribunal’s decision to the FCA.

The Bureau takes representations to the public about performance claims that are not based on prior adequate and proper testing very seriously, particularly when they relate to the health and safety of consumers. Bauer Hockey Corp (Bauer) fully cooperated with the Bureau’s investigation and agreed to cease making certain performance claims related to the Bauer RE-AKT hockey helmet. Under the terms of a consent agreement reached with the Bureau, Bauer made a C$500,000 donation of equipment to a registered Canadian charity supporting youth participation in sport and paid C$40,000 towards the Bureau’s investigative costs. Working with the Bureau, Bauer has also agreed to implement an enhanced Corporate Compliance Program. As a result of this consent agreement, the performance claims are being corrected, and underprivileged children will have greater opportunities to participate in sports.

Merger review

The Bureau continued to review mergers to assess whether they are likely to substantially lessen or prevent competition in the marketplace. In 2014–2015, we completed 244 merger reviews, including 55 complex reviews, and met our service standard for timely review in 99 per cent of non-complex cases. Where the Bureau identified concerns, competitive markets were protected through alternative case resolutions, by the parties abandoning their proposed transaction, or by consent agreements requiring divestitures or behavioural remedies.

In January 2015, the Supreme Court of Canada (SCC) rendered a landmark decision in the Tervita matter, which was the first SCC jurisprudence regarding mergers in almost two decades. This decision provided guidance on prevention of competition and efficiencies – two important issues related to the merger review process. The SCC confirmed that the transaction would lead to a substantial prevention of competition, which is best assessed by analysing what the market would look like ‘but for’ the merger. It also provided guidance on the ‘efficiencies defense’ by instructing how to balance the qualitative and quantitative assessments of anti-competitive effects and efficiencies and directing the Commissioner to quantify anti-competitive effects where possible. Ultimately, the SCC allowed the appeal due to efficiencies. While this case affirms the Bureau’s approach to substantial prevention of competition cases, it also emphasises the need to obtain the necessary evidence in future cases where the efficiencies defence is raised. As such, the Bureau is considering the best use of its information-gathering tools with respect to parties and third parties, where appropriate.

During the review of the international Holcim/Lafarge transaction, the Bureau assessed the parties’ upfront decision to sell all of Holcim Canada’s operations. We ultimately concluded that additional assets located outside the country were important to the effectiveness of Holcim’s Canadian business and ensured that the divestiture package also included a plant in Montana, such that a potential purchaser would be an effective and viable competitor. Given the cross-border flow of cement between the United States and Canada, the Bureau worked very closely with the United States Federal Trade Commission (FTC) to determine the acceptability of Holcim’s initial remedy proposal. Through continued dialogue, the Bureau and the FTC were able to coordinate a resolution to the benefit of the agencies, the parties and, ultimately, the consumers in each jurisdiction.

The Bureau reviewed several mergers in the media sector this year, including the Transcontinental/Quebecor Media and Postmedia/Sun Media transactions. In each of these matters, we recognised that newspapers are double-sided platforms that bring together two different types of economic agents – readers and advertisers – and facilitate interactions between them. We also took into consideration the dynamic nature of media markets and the challenges faced by traditional media in adapting to an increasingly digital world. The Transcontinental/Quebecor Media review resulted in a consent agreement that required the implementation of a sale process for 34 community newspapers by an independent trustee. Many of the overlapping papers were in financial distress and the objective of the sale process was to test the availability of possible alternatives to Transcontinental owning all the papers. In the end, the independent trustee was able to divest 14 papers, with Transcontinental maintaining ownership of the other papers. The Postmedia/Sun Media transaction was not challenged after we concluded that it would not result in a substantial prevention or lessening of competition.

Competition promotion

On the competition promotion front, we continued to increase our advocacy function in different sectors of the economy, released several new guidance documents and advanced our relationships with foreign agencies and other stakeholders.

Advocacy

In 2014–2015, the Bureau made nine presentations to regulators, three times the total for the previous year. In particular, three submissions were made to the Canadian Radio-television and Telecommunications Commission (CRTC) in response to its consultations on the review of wholesale mobile wireless services; the review of wholesale services and associated policies; and Let’s Talk TV: A Conversation with Canadians. In a landmark decision, the CRTC adopted the Bureau’s recommendations regarding television services and will implement new policies that will provide more choice and potentially lower cable bills for consumers.

We also completed two market studies, including one requested by the Ministers of Natural Resources and Industry Canada. This study required the Bureau and the National Energy Board to work together to determine the causes of high propane prices and supply shortages in Canada. The final report was released in April 2014 and describes the causes of market issues and recommends how to avoid similar issues in the future. As a follow-up to the report, Bureau staff appeared at the House of Commons Standing Committee on Natural Resources in December 2014.

To engage the public at large and share the Bureau’s views on economic sectors that could benefit from increased competition, we also launched a new publication, The Competition Advocate. The first issue was about the potential benefits of increased competition in the taxi industry from innovative new digital dispatch services.

Guidance

As part of our ongoing efforts to educate Canadians about the devastating effects of cartels, we held our second annual Anti-Cartel Day in March 2015. To assist businesses and trade associations in recognising and preventing cartel activity, we developed a number of resources, such as new informative videos and webpages that are available on the Bureau’s website, Facebook page and YouTube channel. New webpages entitled Competition in the Construction Industry were added, focusing on a sector that is particularly susceptible to cartel activity.

International and domestic collaboration

In the past year, we have brought focus to and strengthened international and domestic partnerships. The objective of these efforts is to support competition and compliance. Achievements include the signing of Memoranda of Understanding with India’s Competition Commission and with China’s State Administration for Industry and Commerce. These historic agreements are in line with the government of Canada’s priorities and the Bureau’s long-term operational goals.

Three-Year Integrated Plan

2015–2018: Strategic Vision

To serve Canadians better, the Bureau published its 2015–2018
Strategic Vision on 2 June 2015. This vision, which will guide the Bureau’s activities over the next three years, will help improve the effectiveness and efficiency of the Bureau’s competition enforcement and competition promotion activities. Competition enforcement will continue to be the Bureau’s primary focus; however, enforcement will be used in a more strategic way to complement our advocacy and competition promotion efforts to produce maximum benefit for Canadians. More specifically, the Vision identifies the following five strategic objectives for 2015–2018:

•   Increase compliance – use all available tools to increase compliance with Canada’s competition laws and prevent and deter anti-competitive or deceptive conduct that could threaten the health, growth and confidence in the Canadian economy.

•   Empower Canadians – create an environment of competitive prices, greater product choice and informed decision-making for the benefit of all Canadians.

•   Promote competition – promote and advocate for a more competitive marketplace, emphasising smart regulation focused on achieving legitimate regulatory objectives.

•   Collaborate with partners – collaborate with domestic and international partners to promote strong competition principles and expand opportunities for Canadian participation in world markets.

•   Champion excellence – promote a culture of excellence throughout the Bureau founded on openness, collaboration and engagement and securing tangible results.

2015–2016 Annual Plan

Concurrently with the release of our 2015–2018 Strategic Vision, we also published our 2015–2016 Annual Plan entitled ‘Protecting and Promoting Competition for the Benefit of All Canadians’. This forward-looking plan sets out the activities through which the Bureau will deliver on each of the objectives in our Vision during the current year. The publication of these documents supports the Bureau’s Action Plan on Transparency, which promotes the development of a more cost-effective and responsive agency, while providing Canadians with more opportunities to learn about the Bureau’s work.