BUSINESS

A cautious antitrust bill

Shona McKay April 16 1984
BUSINESS

A cautious antitrust bill

Shona McKay April 16 1984

A cautious antitrust bill

Shona McKay

The bill was promoted by the federal government as a much needed overhaul of Canada’s antiquated laws governing business mergers and monopolies. But when Consumer and Corporate Affairs Minister Judy Erola finally introduced a bill to amend the Combines Investigation Act last week, the greatest applause came from the group that the legislation is intended to regulate—large businesses. Chastened by its experience in 1977, when strong opposition from businessmen scuttled proposals for toughening the act, the federal government proceeded much more cautiously with the current legislation, consulting extensively with business groups over a oneyear period to produce a mutually acceptable bill.

The result is a piece of legislation that, if passed, will strengthen the power of the federal government to obtain convictions against businesses that conspire to reduce competition, but will not satisfy consumer critics and economists who want tougher legislation and more built-in safeguards to protect both small business and consumers.

The need to reform the rules affecting competition between businesses has become particularly apparent over the past decade. Between 1975 and 1979 the annual number of business mergers in Canada almost doubled, to 511 from 264. And, according to a 1978 report by the Royal Commission on Corporate Concentration, individual companies and industries in Canada command much more market power than their U.S. counterparts—which could lead to higher prices for consumers.

But, because of the weak nature of existing laws, Ottawa was largely unsuccessful when it attempted to obtain convictions in court. The Electric Reduction Co. of Canada, which pleaded guilty in a 1970 case involving a merger, is the only company in Canadian history that has been successfully prosecuted for a merger that reduced competition. Another rare win for federal investigators came last December when five major van lines pleaded guilty to conspiracy and combines violations.

The new bill, if it passes, will assist government regulators in some key areas. For one thing, cases involving

mergers and monopolies that reduce competition will be tried in civil rather than criminal courts. The change is expected to give Ottawa a better chance of obtaining a conviction because the burden of proof required would be less rigorous. At the same time, federal and provincial Crown corporations and banks will be subject to the same competition laws that apply to private com-

panies. Federal prosecutors can obtain convictions on the charge of conspiracy, which remains a criminal act, by demonstrating the “intent” of two companies to lessen competition. They no longer have to provide documented proof of the effect on competition. As well, the maximum fine for anyone convicted of a conspiracy to lessen competition will be doubled, to $2 million. Large mergers that would create an entity with assets or annual sales of more than $500 million would have to receive prior clearance from Ottawa.

Most large-business groups were gen-

erally pleased with the outcome of the consultations with the government on the issue. Said Thomas d’Aquino, president of the Business Council on National Issues, one of the groups consulted: “The bill has turned out to be a model of how the business-government relationship should work. The new bill will definitely strengthen and clarify the law.”

But, while business groups applauded Ottawa for finally producing a bill acceptable to them, economists, consumer groups and some opposition politicians were critical of what they said was an initiative that caters to the interests of big business at the expense of Canadian consumers and small businesses. Indeed, the bill— which at 49 pages is one-half the size of earlier proposals made over the past decade—does not contain provisions to deal with export agreements that lessen competition in Canada or to allow class action suits by consumers. Said Richard Schwindt, a professor of economics at Simon Fraser University: “Considering that the present laws are so weak, it is hard not to see the new bill as an improvement. But essentially it is not a strong piece of legislation.” The Consumers’ Association of Canada gave the bill “cautious approval” but expressed “serious reservations” about it. In particular, the CAC noted that under the new legislation, whereas civil courts could approve contested mergers if companies showed efficiency gains for the economy as a whole, there is no requirement that such companies must demonstrate how such promises are actually to be passed on to the consumer. Chris Speyer, Conservative critic for consumer and corporate affairs, expressed similar concerns. Said Speyer: “There have to be guarantees. That is going to be a very substantial issue.”

But critics of the bill may get another chance to fight for stronger legislation. It is unlikely, because of the amount of business currently before the House, that the new legislation will be passed by Parliament before the summer recess. And if a federal election is then called by the new leader of the Liberal party, the future of the bill will be thrown into even greater uncertainty. That result would not surprise Schwindt, who declared: “As a people, Canadians have never been drawn to the ideals of competition. The country’s psyche is such that we will probably never have a strong antitrust policy.”_

Merilyn Read