COLUMN

Crackdown on corporate culprits

Diane Francis August 29 1988
COLUMN

Crackdown on corporate culprits

Diane Francis August 29 1988

Crackdown on corporate culprits

COLUMN

Diane Francis

It was appropriate that just days before the second anniversary of Canada’s tough new Competition Act on June 19, courts in two provinces handed down huge fines for rigging bids. Four commercial printing giants, Moore Corp. Ltd. and Southam Printing Ltd. of Toronto, R. L. Crain Inc. of Ottawa and Lawson Business Forms (Manitoba) Ltd. of Winnipeg, were each fined $400,000 by the Saskatchewan Court of Queen’s Bench for rigging bids to supply business forms to two Saskatchewan government agencies in 1980 and 1981. In Nova Scotia, Moore and Crain were also fined $200,000 each for rigging tenders to agencies of that province’s government. Those court decisions marked the beginning of a new crackdown on corporate criminality and even made the officers and directors of these blue-ribbon companies subject to personal fines and jail sentences if caught again. “We are going after bid rigging and price fixing in particular and we want to take on a few significant cases,” declared Calvin Goldman, director of investigations and research at the Bureau of Competition Policy at Consumer and Corporate Affairs Canada in Ottawa.

Goldman and his 260-person staff are beefing up their arsenal of weapons against conspiracy and bid rigging. They also say that they are considering offering corporate criminals immunity from prosecution if they testify in such cases. The idea would be to adopt a program similar to the antitrust immunity program in the United States, where a “first in gets off” publicity campaign, using brochures and films, shows businessmen how such a system of squealing on their peers works.

Such measures belie the sedateness of the celebration held on June 19 by Consumer Minister Harvie Andre for the act’s second birthday. Although the reception on Parliament Hill wasn’t exactly headline-grabbing, it should have been. The Competition Act is one of the most important economic initiatives by this government, along with free trade. Not only has it captured more corporate culprits—cheaters who ruin the economic system— but it will contribute toward restructuring the economy in Canada.

Competition is a more effective way to redistribute wealth, provide opportunities to new generations of Canadians and stem the concentration of power than draconian tax reform or

other measures. When competition is ensured, prices are lower and quality higher. That means that consumers save money, money that can be spent on other goods and services, or saved. And although this money may be a mere pittance per person, in total such savings result in the enormous transfer of revenues into the little guy’s wallet from a few fat-cat conglomerates who have monopolies.

Besides that, the free trade initiative without a Competition Act like the one in place now would invite disaster. This is because under the previous, and useless, Combines Investigation Act, huge U.S. multinationals had a green light to scoop up entire sectors of the Canadian economy or undercut competitors to grab market share— thus holding Canadian consumers to ransom. By contrast, our new act, like the Americans’ tough antitrust laws, will protect competition in Canadian

The 1986 Competition Act is by far one of the most important economic initiatives by the present Conservative government

markets from excessive foreign onslaughts.

The fact is that Canada’s Competition Act is also a model for other countries wrestling with the problem of how to maintain domestic competition without restricting the size of those companies who need to be big in order to export abroad or to compete against imports at home. This is accomplished in the act by allowing those mergers—even if they reduce competition—which provide “real efficiency gains” that will result in lower costs to consumers, increased export sales or the replacement of imports into Canada.

Goldman, an earnest Toronto lawyer who moved to Ottawa in 1986 when he became the competition watchdog, is undoubtedly one of Canada’s most powerful civil servants. Cabinet-appointed, the 38-year-old Goldman can send his team of investigators after everything from misleading advertisements or price fixing to fighting a megamerger, which reduces competition.

As director of investigations, Goldman is the only one in the country who can review any competition-related

transaction in Canada, no matter its size. In fact, as of June, 1987, companies must by law “prenotify” Goldman and his department of any mergers that involve parties with total assets or revenues of more than $400 million or involve a purchase of assets or revenues exceeding $35 million. Goldman and his team then examine the deal in the context of the marketplace to determine whether the merger or acquisition will substantially lessen competition. If it does, they will try to restructure the deal with the parties involved. If that fails, Goldman can fight the transaction by taking the deal before the new competition tribunal, which has the power to allow or disallow the deal.

In the past, criminal legislation required that the government prove that “competition is lessened to the detriment of the public in a merger.” That was a tall legal order, and it was small wonder that, according to Goldman, “there was only one monopoly conviction and not one contested merger conviction in the 70-year history of the Combines Investigation Act.” About mergers, Goldman added: “It used to be you went in and seized records and went to court, but that is not the way we are operating here. I have an open-door policy, and we are encouraging companies to come in and talk with us. We don’t want to unnecessarily kill deals. To accommodate the increasing number of discussions, we are building a second boardroom. This place is a beehive.”

Most importantly, the act appears to have changed business attitudes. Deals are now signed subject to Goldman’s review, many people come to Ottawa to convince him to favorably review their proposals and untold others probably dismiss uncompetitive deals, which would have been allowed in the past.

Meanwhile, business has been brisk at Goldman’s office. Some 248 deals were probed in the first two years of the act. Of these, 45 were intensely studied but not challenged, 31 were monitored but not challenged, five were restructured, five were abandoned by the parties involved, and four were referred to the competition tribunal. And during the past year, Goldman has been prenotified of megamergers at the rate of about eight per month, or 87 since July 15, 1987. “Just as this act was passed, we began the biggest merger mania in history worldwide,” he noted. “The act was passed just in time.”