In a speech earlier today, the new Interim Commissioner of Competition, John Pecman, in his first published remarks as Commissioner, discussed compliance, current Bureau enforcement policies and ongoing cases.
Some of the noteworthy aspects of the Interim Commissioner’s remarks include highlighting the Bureau’s continued enforcement in key areas (notably criminal cartel enforcement, including its Immunity and Leniency Programs, and abuse of dominance), highlighting the recent signals in the Maxzone case that the Federal Court will take a stricter approach to sentencing in cartel matters, and in particular compliance programs urging Canadian companies to adopt compliance programs (and discussing the risk of non-compliance and reputational benefits of adopting a credible program).
Compliance
Given that this speech was Mr. Pecman’s first official one as Interim Commissioner, and delivered at a national law firm seminar for firm clients, it is perhaps not surprising that his remarks focused on compliance:
“… the Bureau promotes compliance through enforcement and it provides the education and the tools that assist the corporate community in developing corporate compliance programs. We all know businesses and individuals have a duty to act lawfully — and, the Bureau expects that businesses and their senior management, on the whole, want to comply with the law. It is our hope that by now, it is clear that the legal, economic and reputational risks of non-compliance far outweigh any perceived advantages. Non-compliance costs businesses dearly – not just in terms of financial and legal penalties, but through negative publicity, loss of business opportunities and lost management time. While I suspect that you recognize the value of a compliance program and that many of you have clearly established compliance policies that identify and address questionable behaviour — and aim to prevent it from occurring in the first place, let me take a few minutes to expand on the benefits of such a program.”
The Commissioner reiterated the five elements that are in the Bureau’s view necessary for an effective compliance program: senior management involvement and support; compliance policies and procedures; training and education; monitoring, auditing and reporting mechanisms; and consistent disciplinary procedures and incentives.
Some of the specific compliance themes the Commissioner discussed included compliance programs that are not followed, the importance of senior management promotion of compliance policies and monitoring and internal power to enforce policies. The Commissioner was particularly critical of compliance programs that were well prepared but not followed or effectively delivered. In this regard, the Interim Commissioner said that “the issue is not [a compliance program’s] content, or [its] quality – the issue is internal enforcement …”
Trade Association Compliance
Interestingly, the Interim Commissioner also made a number of specific remarks relating to trade associations. These included highlighting the particular potential risks of associations (saying that associations face “unique compliance issues” and are “naturally exposed to greater risks of anti-competitive behavior”) and emphasizing the importance for associations to have effective compliance programs.
The Interim Commissioner also said that the Bureau would be likely to show an interest in trade association conduct where they engaged in three categories of conduct: (i) restricting the types of professional service practice offerings (e.g., setting limits on things like office location or size); (ii) limiting the number or range of members’ ability to compete (e.g., through mandatory or suggested fee schedules or product standards); or (iii) conduct that reduces incentives to compete vigorously (e.g., information sharing agreements and the exchange of competitively sensitive information).
The Criminal Matters Committee of the Canadian Bar Association’s Competition Law Section will be offering a webinar on cartel enforcement in smaller jurisdictions with the ABA’s Section of International Law on November 6, 2012. From the CBA:
“Cartel enforcement in smaller economies can involve unique issues, including as a result of relatively thin markets that accommodate fewer players of appreciable scale and the existence of industrial policies and business cultures that may clash with competition law principles. In addition, leniency-driven cartel enforcement in relation to alleged international cartel conduct can raise challenging issues for competition agencies and investigated parties alike, especially outside the United States and European Union, where leniency applicants (and investigated parties) are incentivised to concentrate their efforts.
Register for this teleseminar to hear how enforcement officials in Canada, Ireland, New Zealand and Israel are tackling a variety of issues in cartel enforcement, including: drafting anti-cartel laws that clearly distinguish between unlawful cartels and beneficial, efficiency-enhancing, competitor collaborations; working with corporations and government to promote a culture of compliance; drafting and administering effective leniency programs that account for and mitigate parties’ natural pre-occupation with ‘primary’ competition jurisdictions; leveraging international networks and cooperation with other competition agencies; accessing evidence and witnesses in foreign countries; establishing jurisdiction over alleged cartel conduct originating abroad; avoiding resource fatigue from foreign leniency applications and maintaining a credible enforcement program targeting domestic cartels; building a strong enforcement culture and obtaining precedent-setting sanctions in the face of penalties and class action suits for the same conduct in other jurisdictions.”
I am pleased to be delivering two upcoming competition law compliance courses (Competition Law and REALTORS®) for the members of the Kamloops (November 26th) and Victoria (November 29th) real estate boards.
The compliance seminars will include overviews of Canadian competition law enforcement, the Competition Bureau, the conspiracy, misleading advertising, price maintenance and abuse of dominance provisions of the Competition Act and practical real estate related case studies.
Competition Law and REALTORS®: What You Say and Do Matters is a national competition law compliance course designed by the Alliance for Canadian Real Estate Education with the assistance of The Canadian Real Estate Association to help Canadian REALTORS® understand and comply with Canadian competition law. While Canadian competition law applies to all real estate professionals, this course was designed specifically for REALTORS®. This course provides an overview in plain language of Canadian competition law and practical compliance guidelines to assist REALTORS® in complying with Canadian competition law and a number of illustrative case studies.
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For more information about our regulatory law services contact us: contact
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Conventional thinking has been that the most serious consumer protection enforcement tends to be under federal law (e.g., the Competition Act or Criminal Code). That reasoning changed somewhat last week with an Oakville company being found guilty by a Newmarket Ontario court of violating the Ontario Consumer Protection Act (the “CPA”), fined $250,000, ordered to pay more than $100,000 in restitution to customers with the firm’s director also sentenced to six months in jail. These are the most significant penalties ever imposed against a business under the CPA.
The Oakville heating and cooling company and its director had been charged with 21 violations of the CPA. In making the announcement, Ontario’s Ministry of Consumer Services said:
“It had been alleged that between March and November 2008, Mr. Preston and his company misled consumers in Markham, Stouffville, Toronto and Mississauga by providing contracts and accepting payments for services and products he knew his failing company would be unable to provide. Heating and cooling systems that were supplied malfunctioned shortly after installation and consumers were not given refunds when contracts were cancelled.”
The CPA governs many common types of consumer transactions in Ontario and regulates, among other things, consumer agreements (including future performance, time share, Internet, distance and direct sales agreements), certain types of misleading claims and some specific sectors (including auto repair, credit and leasing).
In the most noteworthy Canadian competition/antitrust law development today, the Competition Bureau announced that a settlement (consent agreement) had been reached in this case, one of two contested mergers in the past few years in Canada (together with the recent CCS hazardous landfill case which was recently decided by the Competition Tribunal and is currently on appeal).
This case, which was to scheduled to be heard in early November before the Competition Tribunal (see: here and here) was noteworthy for being one of only two contested mergers currently underway in Canada and for representing the first challenge, if it had proceeded, of agreements (in this case joint venture agreements between Air Canada and Continental) under Canada’s recently enacted civil agreements provision of the Competition Act (section 90.1 – which, together with section 45, comprises Canada’s new two-track conspiracy/cartel regime).
The Bureau had been challenging three existing Air Canada / Continental “coordination agreements” under section 90.1 of the Competition Act, under which the Bureau can apply to the Competition Tribunal for remedial orders where agreements between competitors prevent or lessen (or are likely to prevent or lessen) competition substantially in one or more relevant markets.
There has not yet been a contested section 90.1 case since this new “civil agreements” provision came into force (which is thought may apply to a range of commercial agreements that, while they may not constitute “hard core” cartel type agreements under section 45 of the Act – i.e., price-fixing, market division/allocation and output restriction agreements – may nevertheless prevent or lessen competition substantially in some cases).
While it is thought that the new section 90.1 may apply, in some instances, to joint venture, franchise, licensing, information exchange and research and development agreements, among others, where competition is substantially impacted, the boundaries of section 90.1 now remain as yet unknown and untested.
“In the 2002 film Minority Report, Steven Spielberg imagined a world in which companies use biometric technology to identify us and serve us targeted ads. Ten years later, that vision is coming closer to reality. Having overcome the high costs and poor accuracy that once stunted its growth, one form of biometric technology – facial recognition – is quickly moving out of the realm of science fiction and into the commercial marketplace.
Today, companies are deploying facial recognition technologies in a wide array of contexts, reflecting a spectrum of increasing technological sophistication. At the simplest level, the technology can be used for facial detection; that is, merely to detect and locate a face in a photo. Current uses of facial detection include refining search engine results to include only those results that contain a face; locating faces in images in order to blur them; ensuring that the frame for a video chat feed actually includes a face; or developing virtual eyeglass fitting systems and virtual makeover tools that allow consumers to upload their photos online and “try on” a pair of glasses or a new hairstyle.”
(U.S. Federal Trade Commission, Report,
Facing Facts: Best Practices for Common Uses of Facial Recognition Technologies)
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For those who have seen the Tom Cruise film Minority Report, you will surely remember the scene where Tom Cruise cruises through Gap and gets targeted ads directed at him. I can’t quite recall if this was an accelerated version of geo targeted advertising or facial recognition (or be sure that I could decode the technology in any event).
In any event, that was the first thing that came to mind when I saw that the U.S. Federal Trade Commission has just published a new staff report yesterday on advertising and privacy issues connected to facial recognition technologies – called: Facing Facts: Best Practices for Common Uses of Facial Recognition Technologies – and sure enough the lead-in to the report describes facial recognition technology, like that depicted in Minority Report, becoming a reality.
In issuing the new report, the FTC said:
“The Federal Trade Commission today released a staff report “Facing Facts: Best Practices for Common Uses of Facial Recognition Technologies” for the increasing number of companies using facial recognition technologies, to help them protect consumers’ privacy as they use the technologies to create innovative new commercial products and services.
Facial recognition technologies have been adopted in a variety of contexts, ranging from online social networks and mobile apps to digital signs, the FTC staff report states. They have a number of potential uses, such as determining an individual’s age range and gender in order to deliver targeted advertising; assessing viewers’ emotions to see if they are engaged in a video game or a movie; or matching faces and identifying anonymous individuals in images.
Facial recognition also has raised a variety of privacy concerns because – for example – it holds the prospect of identifying anonymous individuals in public, and because the data collected may be susceptible to security breaches and hacking.”
The FTC’s new report makes a number of recommendations for companies utilizing facial recognition technologies for advertising including designing services with consumer privacy in mind; developing reasonable security protections for information collected (and policies for determining what information to keep and discard); and evaluating the sensitivity of information when developing facial recognition related products (e.g., digital signs that use facial recognition technology is recommended not to be set up in places where children may be targeted).
The report also makes a number of other recommendations, including in relation to notice, disclosure (i.e., what data will be collected and how it will be used), choice to participate (or opt out) and affirmative consent in some cases.
Last week the CRTC announced that it was denying BCE’s proposed acquisition of Astral, late Friday night the Federal Government announced that it was opposing Petronas’ proposed acquisition of Progress Energy, then late this afternoon, as anticipated, BCE announced it was asking the Federal Cabinet to issue a policy direction under the Broadcasting Act directing the CRTC to follow its policies for change of control broadcasting transactions. In making its announcement BCE said:
“In rejecting the Astral transaction the CRTC rejected its own established policies, creating serious regulatory uncertainty in Canada’s vital broadcasting sector … We’re requesting that Cabinet provide the required guidance to the CRTC to follow its own rules in place, with which the Astral-Bell transaction fully complied.”
Canadian and international firms, it seems, are growing restless with the Federal Government and regulatory agencies determining which deals clear and which are blocked, and related tests (in one instance net benefit to Canada the other a public interest test).
On the other hand, these recent transactions raise important questions about the appropriate factors that should underlie acquisitions of major broadcasting undertakings by market leaders and significant investments in Canada by foreign governments. These include market and consumer effects, choice, security issues and the level of real reciprocal investment. Canadian shareholders and funds want payouts and the free movement of capital and confidence in Canadian capital markets are all highly legitimate concerns, but these decisions have shown (through public opinion and, in the case of the BCE/Astral transaction, through extensive public hearings) that the ability to move capital is not the only concern to Canadians.
In the case of the BCE/Astral deal, one of BCE’s primary arguments has been that it needs scale and size to better compete with global rivals. But what of Canadian consumers facing less competition yet in one of the most concentrated media markets in the world? The CRTC’s Chairman stated during the public hearings that he had spent his summer holiday reading negative comments about the proposed BCE/Astral transaction. Should negative (and allegedly biased and partisan) comments trump CRTC policy?
Of course, more oversight could cure market power concerns (like the OSC’s promised regulation of Canada’s leading securities exchange).
Petronas and Progress
In an announcement earlier this morning shortly before markets opened, Petronas and Progress Energy announced they would be working to cooperatively address the Investment Canada announcement Friday rejecting Petronas’ investment in Progress and meeting with Industry Canada officials. It remains to be seen whether this signal of commitment to negotiate successful undertakings will lead to ultimate clearance of the investment or whether, like BHP’s bid for Potash, Petronas will find that it ultimately cannot meet Industry Canada’s requirements to clear the deal.
In making the announcement, the parties said:
“PETRONAS Carigali Canada Ltd … and Progress Energy … announced today that they will be meeting with officials from Industry Canada in Ottawa to better understand Industry Canada’s requirements with respect to the proposed acquisition of Progress by PETRONAS Canada.
Based on the announcement by the Minister of Industry on Friday October 19, 2012, PETRONAS Canada has up to 30 days, or longer as mutually agreed to, to make any additional representations and submit any further undertakings. PETRONAS and Progress will work together to ensure that the Minister has the necessary information to determine that the proposed acquisition of Progress would likely be of net benefit to Canada.
In conjunction with this 30-day period, and at PETRONAS Canada’s request, Progress has agreed to waive the 10 day notification period required to extend the “Outside Date” under the arrangement agreement between the two companies. Under the agreement, PETRONAS Canada has the right to extend the Outside Date for up to an additional 90 days, in 30-day increments, if required regulatory approvals have not been obtained. If the Outside Date is not extended, the agreement will still continue in effect until terminated by either party.”
Prime Minister Harper (reported by BNN)
BNN reported Monday that Prime Minister Harper said that the Government was committed to the Investment Canada Act, that they intended to issue clearer policy on Investment Canada reviews, but “at this time” the Progress-Petronas transaction did not have net benefit to Canada. (A little more information on promised ICA transparency and some comfort it seems for the markets and investors.)
NDP Natural Resources Critic, Peter Julian
There is a “clear problem here”. Renews NDP calls for “clear criteria” for Investment Canada Act net benefit to Canada test and reiterates criticism of release of decision at midnight on Friday.
Progress CEO Michael Culbert
“I am pleased to say that over the weekend Progress and Petronas had a lot of discussions, and Petronas is very much engaged and once they were over the shock, like the rest of us, we were looking for further communication with Industry Canada to see if the issues could be resolved in a mutually agreeable way in a fairly shot timeline … My feeling today is that I have a lot more positive outlook that the issues at hand [will be resolved]”
Jimmy Pattison
“Happy to see the decision”, “Governments [invest] for different reasons than businesses … with different objectives, timelines and interests”, in the long run investments by foreign governments in Canada is “not good for our country”.
Canadian Trade minister Ed Fast
“This decision does not set a precedent because every single application is considered on its own merits”.
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
