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November 20, 2012

The C.D. Howe Institute published a new competition/antitrust related report today entitled “Closing the Back Door Route to Cartels: The Need to Clarify the Regulated Conduct Doctrine” that calls for the Competition Bureau to clarify how the regulated conduct defence applies and how the Bureau may act as an advocate of competition in regulated sectors.

I found this new report somewhat curious, in that it harkens back to the significantly more advocacy focused efforts of Canada’s former Commissioner of Competition (Sheridan Scott), who was highly engaged, among things, in efforts to deregulate segments of the health care sector (uncoupling dental hygienists from dentist oversight for example) and producing a significant report on competition in the professions (Self-regulated Professions Report).  It is also not clear that the Bureau has an appetite to expand its guidance of its approach to the RCD (or amplify its advocacy efforts) given that in the past few years it has been moving in the opposite direction – i.e., narrowing some guidelines (e.g., its recently updated Abuse of Dominance Guidelines) and showing an increased focus on enforcement (not advocacy) and a desire to expand Canadian competition law through the courts (not through more guidelines).

Having said that, some increased clarity and certainty in relation to mergers in regulated sectors, including as recommended in this new report those regulated by the CRTC and the Bureau, would certainly be welcome.

Overview:

“The Competition Bureau should actively engage in competition matters in regulated sectors of the economy, where anti-competitive conduct may be protected by government legislation or authority. This is the consensus view of the C.D. Howe Institute’s Competition Policy Council, which held its fourth meeting on November 8, 2012.

Members of the Council held that the Bureau should more clearly delineate the scope of anti- competitive practices that it sees as protected by provincial or federal legislation or delegated authority; and it should be directly engaged in regulatory decisions that potentially impair competition. As well, the Bureau should contribute independent analysis in merger reviews in regulated sectors. …
At Issue: The Regulated Conduct Doctrine (RCD) protects cartels, and potentially other forms of anti-competitive conduct, that would otherwise be subject to scrutiny under the Competition Act if, according to the Competition Bureau’s interpretation, the conduct is authorized by provincial or federal legislation or authority. Although the RCD is prominent in provincially regulated sectors – such as agriculture marketing boards, professional services, energy and alcohol retailing – conduct in federally regulated sectors – such as transportation, telecommunications and broadcasting – may also potentially be protected under the RCD.

At the November 8th meeting, the Council addressed the following questions: ‘Does the RCD, as interpreted and applied by the Bureau, make good law and economic policy? What steps can and should the federal government and the Bureau take to limit the scope and application of the RCD, and how should the Bureau revise its interpretation of the doctrine? In what affected sectors should the Bureau seek to enforce rather than forebear application of the Act?’

There was a range of views among the Council members about how the Bureau should refine its view of Competition Act enforcement in regulated sectors, which all agreed is currently unclear. Some members contended that the Bureau, in the absence of case law, should develop more detailed guidelines on how the RCD will apply. Others, taking on the perspective of the Bureau, expressed scepticism that it would be willing to engage in such an exercise and, in any event, at least with respect to criminal matters, private litigation will help clarify the RCD’s boundaries over time. There was unanimity, however, on the point that the Bureau should have a role in analyzing the competitive effects of mergers in regulated sectors. The Council concluded that the Bureau should conduct a serious review of the scope, interpretation and economic implications of the RCD, as it has evolved through common law and statute. The Council’s key recommendation is that the Competition Bureau should clarify how the RCD will apply and how the Bureau might act as an advocate of competition in regulated sectors.”

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