Proposals for a New Canadian Competition Law on Conspiracy
| Author | Thomas W. Ross |
| 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
TD.
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 MacLeod, 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.> 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 a
better
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. Iwill, 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 (hereinafter Charter).
3Competition Tribunal Act, R.S., 1985,c.19 (2d Supp.).
4On the 1986amendments 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
6An Act for the Prevention and Suppressionof Combinations formed
in Restraint of Trade (52 Victoria,
cAl).
7In sugar, coal, agricultural implements and 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
effective administrative machinery 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
OBJECITVES
OF
CANA-
DIAN
C0MPE1TI10N
POUCY
1888-1983 (1984).
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