Competition Bureau
Market Studies - A Review by the Competition BureauOctober 6, 2005
Background When the House of Commons Standing Committee on Industry, Science, and Technology (the Committee) reviewed Bill C-23 (S.C. 2002, ch.16), An Act to amend the Competition Act and the Competition Tribunal Act, in the Fall of 2001, a Member of Parliament, the Honourable Dan McTeague, proposed a motion to allow the Commissioner of Competition, with the approval of the Minister of Industry, to ask the Canadian International Trade Tribunal (CITT) to inquire into the state of competition in any sector of the Canadian economy. At that time, the then Commissioner said that this proposal should have the benefit of consultations before such an amendment should be considered. Currently, the Competition Act does not allow for market studies, with the use of formal powers to compel the production of information, into an industry. An inquiry is launched only to investigate a business, or individual, that has likely contravened the Act or is about to do so. In 2002, the Committee released a report entitled A Plan to Modernize Canada’s Competition Regime which recommended a wholesale reform of competition policy in Canada. In October 2002, the Government tabled its response to the recommendations contained in the Industry Report. The Government committed to consult widely with stakeholders on a number of proposals to be developed in a discussion paper. National consultations were launched on June 23, 2003, with the issuance of a discussion paper entitled Options for Amending the Competition Act: Fostering a Competitive Market Place. The June 2003 Discussion Paper incorporated the original proposal from the Honourable Dan McTeague for consultation. The Public Policy Forum (PPF), a not-for-profit organization, conducted national consultations following the release of the Discussion Paper. More than a hundred individuals, businesses and associations provided written comments on the proposals included in the Discussion Paper. A wide range of stakeholders commented on the proposal for market studies. Those who supported the market studies proposal indicated in general terms that they felt the power could be useful. They felt that the government should be better informed on industry and the markets. International respondents explained that their competition authorities are vested with similar powers and that they have proven to be valuable assets. Those opposed to the proposal suggested that the Commissioner of Competition already has the necessary tools to enforce the Competition Act and that the Commissioner could carry out studies by hiring consultants or experts. They raised concerns about the considerable time and potential significant costs for both the government and businesses. They were concerned about procedural safeguards and whether such a power could be used as an inappropriate means of diverting political pressure on the Competition Bureau. Some also stated that there already exists in Canada various means to conduct such studies, such as the Inquiries Act, the CITT Act and parliamentary committees. Many participants were of the view that the CITT was not the appropriate body to conduct such studies1. During the Committee hearings on Bill C-19, An Act to amend the Competition Act and to make consequential amendments to other Acts, the Commissioner of Competition indicated that the Bureau was continuing its analysis of such powers to conduct market studies, given the comments received during the consultations. As well, the Commissioner indicated that the Bureau would need to look at Charter implications. As part of the analysis of this issue, the Bureau also planned to carry out an international bench marking exercise to look at the ability of other jurisdictions to conduct market studies. Finally, it was indicated that the Bureau would share the results of the review with this Committee. What the Bureau has found is that if such market studies are conducted for a legitimate purpose to assess the state of competition in various sectors of the economy, i.e. that they are not a disguised enforcement inquiry, and provided that such a power contains protections against self-incrimination, it could be possible to integrate such a power into the Competition Act. The Bureau also found that several antitrust authorities have such powers, as described briefly below, and as detailed in Appendix 1 to this document2.
The Federal Trade Commission (FTC) can conduct "research and policy" reports. Inquiries can be initiated by Congress or the FTC on its own initiative. There are no formal criteria limiting what kind of research and policy inquiries the FTC can undertake. The process followed depends on the nature of the inquiry but they are relatively informal and non-adversarial. The FTC rarely uses its subpoena powers. Section 46(f) of the Federal Trade Commission Act allows the FTC to publish portions of information obtained pursuant to market studies. The FTC may not make public any trade secret or other commercial or financial information which is privileged and confidential. However, the FTC may disclose such information to a law enforcement agency upon certification that the information will be maintained in confidence and will be used only for official law enforcement purposes. The FTC does not conduct criminal antitrust matters. European Union The European Commission (EC) has the power to conduct general inquiries into any sector of the economy if “the trend of trade between Member States, the rigidity of prices or other circumstances suggest that competition may be restricted or distorted within the common market”. The power, while used to a limited extent in the past, has been used more frequently during 2005. In June 2005 two “sector inquiries” were launched, one into competition in the energy sector - specifically gas and electricity markets - and another into the financial services sector. The EC does not conduct criminal antitrust matters. United Kingdom The Enterprise Act 2002, which came into effect during the Summer of 2003, expanded the powers of the Office of Fair Trading (OFT) to make "market investigation references" to the Competition Commission for general inquiries. Previously limited to possible monopolies acting against public interest, the OFT can now make references if there are "reasonable grounds for suspecting that any feature, or combination of features, of a market ... prevents, restricts or distorts competition." The legislation specifically concerning market investigation references is extensive and both the OFT and the Competition Commission have published related Guidelines. There are also “market studies”, which are done exclusively by the OFT. Market studies are used where concerns exist that a given market is not working well for consumers, but where competition or consumer regulation enforcement action does not appear to be an appropriate response at the moment. A market study can lead to enforcement action, a reference to the Competition Commission, recommendations for changes to laws or regulations or consumer education and awareness campaigns. The OFT forecasts that it will have spent approximately 34.7 million CAD dollars in market studies between 2002 and 2006. For the period 2005-063, the OFT proposes to allocate at least 13% of its budget to market studies i.e. around 15.5 million CAD dollars. Australia Australia can conduct general inquiries through section 28(1)(c) of the Trade Practices Act (the TPA) which allows the Australian Competition and Consumer Commission (ACCC) "to conduct research in relation to matters affecting the interests of consumers." An inquiry can be initiated by the ACCC’s Commissioner or its Minister. The ACCC has no power to compel information for such an inquiry but information is usually provided voluntarily as the relevant parties recognize it is in their interests to avoid a potentially more formal government inquiry. Part IIA of the TPA contains provisions to allow the ACCC, with Ministerial authorization, to research, monitor and investigate specific persons and industries. These provisions allow for the compelling of information and documents. In terms of costs, as an example, the ACCC spent in the range of 1.5 million CAD dollars over the last three years to monitor medical indemnity insurance premiums4.
Footnotes 1 Public Policy Forum, National Consultation on the Competition Act - Final Report, April 8, 2004. 2 The information is based on publicly available documents. 3 Office of Fair Trading, Annual Plan 2005-06, p. 27 4 Australian Competition an Consumer Commission, ACCC Annual Report 2002-03, p. 108 and ACCC Annual Report 2003-04, p. 117. 
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Created: 2005-11-02 Updated: 2005-11-02 |
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