Proposals for a New Canadian Competition Law on Conspiracy
| Published date | 01 December 1991 |
| Date | 01 December 1991 |
| DOI | http://doi.org/10.1177/0003603X9103600406 |
| Subject Matter | New Directions in Canadian Law |
The Antitrust Bulletin/Winter 1991
Proposals for a new Canadian
competition law on conspiracy
BY THOMAS W. ROSS*
I.
Introduction
851
Recent challenges to the constitutionality of the conspiracy sec-
tion
of
Canada's Competition Act' have raised the possibility
of
*Department
of
Economics, Carleton University, Ottawa, Canada.
AUTHOR'S NOTE: This article was prepared for presentation at an invited
Contemporary Policy Session at the Western Economics Association's
66th Annual Conference, in a session consponsored by The Antitrust Bul-
letin. Much
of
this work was done while the author held the T.D. McDon-
ald Chair in Industrial Economics at the Bureau
of
Competition Policy,
Consumer and Corporate Affairs Canada. The views expressed here are
solely those
of
the author and are not necessarily those
of
the Bureau
of
Competition Policy. Very helpful discussions with and comments from
Paul
Crampton,
Paul
Denis.
Alan Fisher.
Nancy
Gallini,
William
Kovacic, James Langenfeld. Bentley Macl.eod, Donald McFetridge, Frank
Mathewson, William Stanbury, Michael Trebilcock, Gregory Werden,
Robert Willig and several officials
of
the Bureau
of
Competition Policy,
are gratefully acknowledged. The Bureau
of
Competition Policy, the
Social Sciences and Humanities Research Council
of
Canada and the
Carleton Industrial Organization Research Unit provided financial sup-
port.
e1992 by Federal Legal Publications. Inc.
852 : The antitrust bulletin
amending
the
oldest
provisions
in
Canada's
antitrust
arsenal.
While some proposals for reform will undoubtedly focus on
the
minimum changes necessary to satisfy the Charter
of
Rights and
Freedoms.s I
would
argue
that
this
is a
unique
opportunity
to
modernize asection
of
the law that looks remarkably like its 1889
ancestor.
In the
extensive
amendments to
Canada's
antitrust
law
that
produced
the 1986
Competition
Act and
Competition
Tribunal
Act.' the
law
on conspiracy was left largely untouched as atten-
tion
focused on much more urgent problems in the areas
of
merg-
ers
and
abuse
of
dominance.' However, the recent constitutional
challenges
may
put
reform on the front burner.
And
given
that
there is reason to believe that abetter approach to conspiracy
law
might
be
possible
in
light
of
recent
learning
about
horizontal
arrangements, this article offers some general proposals.
The
article begins by explaining the current law and describing
briefly the nature
of
the challenges.! After reviewing the economic
theory on the costs and benefits
of
collusion, two new approaches
are considered. The reader should be aware that the purpose here
is to design alternatives that satisfy economic theory; while it is
my hope that they
can
be made constitutionally sound, that will be
for others with different expertise to assess. I will, however, offer
comments on how my proposals might be seen to be responsive to
the concerns raised in the successful challenges.
2Canadian Charter of Rights and Freedoms, Constitution Act,
1982, part I (hereinafterCharter).
3Competition Tribunal Act, R.S., 1985, c.19 (2d Supp.).
4On the 1986 amendments see Maule &Ross, Canada's New Com-
petition Policy, 23
GEO.
WASH.
J.
INf'L
L. &ECON. 59 (1989).
SFor a more detailed review of the history of conspiracy law and
enforcement in Canada, the interested reader should consult W. Stanbury,
Legislation to Control Agreements in Restraint of Trade in Canada:
Review of the Historical Record and Proposals for Reform (mimeo,
October, 1989), forthcoming in a volume published from the National
Conference on the Centenary of Competition Law and Policy in Canada,
Toronto, October 1989.
Canadian competition
law:
853
II.
The
current
Canadian
law
on
conspiracy
and
recent
challenges
The
current Canadian law on agreements is contained in sec-
tion
45
of
the 1986 Competition Act, reproduced in the appendix.
In general, it makes criminal offenses
of
agreements that
"prevent
or lessen,"
or
"restrain
or injure," competition
"unduly."
Some
of
the wording
of
this section dates to
Canada's
original competition
law
of
1889,6 which was passed in response to a House
of
Com-
mons
committee's
report on combinations in a
number
of
Cana-
dian
industries,"
In comparison with the
other
major
sections
of
Canadian
com-
petition law, namely those relating to mergers and monopoly,
the
law
on
conspiracy
has a
reasonably
proud
history.
Many
cases
have
been
brought
and won by the government.
Green
reports that
in
the
period
1889-1987
the Crown
won
92
out
of
the 126
con-
spiracy cases that went to trial.8
In the 1970's, however, two problems emerged that continue to
plague enforcement efforts.
The
first had to do with the interpreta-
tion
of
the term "unduly" and the second with the question
of
intent.
In early cases courts had little trouble deciding what was an
"undue"
lessening
of
competition, finding its definition through
the use
of
synonyms like improper and excessive. In his famous
concurring
opinion
in Howard Smith
Paper
in
1957,
Justice
6 An Act for the Prevention and Suppression of Combinationsformed
in Restraint of Trade (52 Victoria,
cAl).
7In sugar, coal, agricultural implementsand fire insurance, among
others. For a brief review of the historical development of Canadian com-
petition policy see C.
GREEN,
CANADIAN
INDUSTRIAL
ORGANIZATION
AND
POL-
ICY
(3d ed. 1990),and Stanbury, The Legislative Development
of
Canadian
Competition Policy, 1888-1981, at 2
CAN.
COMPo
POL.
REc. 1 (1981).
8C.
GREEN,
supra note 7, at 310. The first half century was much less
active than the second because (among other reasons) of the lack of an
effectiveadministrativemachinery to develop cases. Of the 126 conspiracy
cases concluded between 1889 and 1987, 104 were from the period
1947-87. See also P.
GoRECKI
&W.
STANBURY,
THE
OBJECTIVES
OF
CANA-
DIAN
COMPETITION
Poucr 1888-1983 (1984).
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