Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 13 - Evidence - September 23, 2003
OTTAWA, Tuesday, September 23, 2003
The Standing Senate Committee on Transport and Communications met this day at 9:43 a.m. to examine the current state of Canadian media industries; emerging trends and developments in these industries; the media's role, rights, and responsibilities in Canadian society; and current and appropriate future policies relating thereto.
Senator Joan Fraser (Chairman) in the Chair.
The Chairman: I call the meeting to order and welcome honourable senators, witnesses and the public viewers to this first working session of the fall. The Standing Senate Committee on Transport and Communications is examining the state of the Canadian news media.
[Translation]
Today, the committee resumes its examination of the appropriate role of public policy in helping to ensure that the Canadian news media remain healthy, independent and diverse, in light of the tremendous changes that have occurred in recent years— notably, globalization, technological change, convergence, and increased concentration of ownership.
[English]
Over the next several weeks, we will receive evidence from different groups that are currently active in the sector, including owners, operators, unions and associations. This week, we will hear from government regulators. On Thursday, representatives from Canadian Radio and Telecommunications Canada, CRTC, will be before us.
Today, it is my pleasure to welcome Mr.GastonJorré and Mr.PeterSagar from the Competition Bureau.
Welcome to the committee, gentlemen. We look forward with interest to hearing what you have to say. We will hear your opening statement, after which we will have questions for you.
Mr. Jorré, please proceed.
[Translation]
Mr. Gaston Jorré, Acting Commissioner of Competition, Competition Bureau, Industry Canada: I welcome this opportunity to participate in your public consultation process as you undertake a study of the current state of the Canadian media industry.
I will first provide some background on the Competition Bureau, our role and responsibilities. I will then address the specific issues on which the committee has indicated an interest in hearing my views.
[English]
As you know, we have specific statutory responsibility for promoting and enhancing competition. The bureau has considerable expertise in assessing issues relating to competition. We are responsible for enforcing a modern and effective Competition Act.
In addition to being enforcers, we also have a role as the advocates of competition. We strive to ensure that Canadians enjoy a competitive marketplace with competitive prices, quality and service.
[Translation]
I would first of all like to discuss the application of the Competition Act so that you can understand our role.
As a law of general application that covers all businesses, the Competition Act has no specific provisions regarding broadcasting, telecommunications, newspapers or other media. When we apply it to specific cases, we do so using an analytical framework common to all of the industries.
However, in applying the law, we very carefully take into account the structure of the industry, the environment in which it works, and the market for its products.
[English]
In this respect, it is worth my taking a moment to talk about the character of media markets. We tend to think of markets in traditional terms— the historical example, if you like. We think of farmers' markets where many vendors at their stalls sell a variety of produce, of differing quality and price, to many purchasers choosing from among the produce that is of the quality and price they want. Media markets are somewhat different because the apparent product is not, in most cases, the dominant commercial product. We also typically think of television programs, radio programs or newspapers as the product. However, the dominant character of these industries is usually that the product is the television viewer or the radio listener or the reader that are provided to the advertisers — if you like, in short, they are advertising markets. They are the dominant market and so we find ourselves looking at them most closely when we apply the Competition Act in these industries.
Let me tell honourable senators what we have found historically when we have had occasion to examine transactions in these industries. I should like to emphasize that these findings are not binding in the future, but they are facts that we have found in each case. In a future transaction, if you find that the market is different, it is that market that you must use as the basis for analysis.
Historically, we have found that certain kinds of media may be local or national in their geographic nature. Much of the time, newspapers are local in the advertising market, although we also have two major national newspapers with some national advertising. TV advertising at the network level tends to be national. We have also found, historically, that because of their different characteristics, newspapers, radio and television generally serve different advertising markets. I would emphasize that each transaction must be verified each time. One cannot simply assume that what was true in the past would be true today.
When we have a merger and acquisition in the media industry, once we have defined the relevant markets, we have to consider the likely economic impact of the transaction and whether there is an increase in concentration. The key test under our act is whether the transaction will substantially lessen or prevent competition. Only if that is the case could we challenge the transaction in front of the Competition Tribunal. I would note that the status quo is a given. We only look at the change resulting from the transaction.
Our act does not deal with a market in a merger transaction if it is already a monopoly market. This has a number of implications. For example, if a merger were to involve merging the ownership of newspapers in different cities and if you were to find that the advertising markets of these papers were local in nature, then that would not likely raise issues under our act. Similarly, if you were to have a media transaction with newspapers in the same city and if we were to find that the advertising markets served our distinct markets, it would not likely raise issues under our act.
The interest of honourable senators on this committee is in the diversity of voices; however, our act is not concerned with that issue, although in some ways, we may have an effect indirectly on that issue. Nevertheless, that is a by- product, if you like. Sometimes, in seeking to either have a transaction modified to avoid competitive issues under our act or in seeking to stop it, we may, as a by-product, maintain a greater number of owners than might otherwise be in place. As a by-product, that may impact on diversity.
For example, had the Astral-Télémédia transaction gone through as originally planned, the result would have been threeradio networks under a single ownership. We had difficulties withthat and eventually negotiated a deal whereby one of thenetworks would remain under different ownership. As a by-product, that produces two owners where you would have had one otherwise. That may have an impact on the diversity of voices ultimately. As I say, that is not something our act is designed to deal with.
[Translation]
I am here to discuss the application of the law. However, we also act as the advocates of competition in Canada. In this regard, we want consumers to have as many choices as possible.
We live in a democracy and democracy needs a diversity of voices if it is to function well. Diversity of voices can been achieved through diversity of media outlets, diversity of ownership, including ownership forms.
[English]
If I may just stop for a moment and take up one of the last points, that is, diverse forms of ownership as well as diverse owners. Economically, different ownership structures may have different incentives. I just point out that that can result in different products.
If you have a non-profit organization that owns a media outlet, their goals are likely to be different from a profit- making one. Thus, they add variety. University radio stations, for example, are quite different from commercial radio stations or from the CBC. It is worth considering that, as well as different owners. Different commercial owners may have different goals. Certainly, historically we have seen that some have quite different goals from others.
I understand that witnesses in these hearings have expressed a wide range of views on the current state of diversity provided by media industries, some extolling the impact of new technology such as the Internet, others expressing concern about the number of Canadians who are taking advantage of these opportunities. We are in favour of greater choice and of varied ownership of media outlets, which could thereby increase consumer choice, especially if different owners have different objectives. One hopes that if one has different owners, different forms of ownership, one will have a variety of product choice, which may indirectly benefit diversity of voices.
Many of the proposals suggested by other witnesses in these hearings may provide ways to promote diversity, including liberalizing foreign ownership restrictions. In my role as advocate of competition, I would encourage the committee to consider these options.
I should like to turn briefly to the Competition Bureau interface with the CRTC. Both the Competition Act and the Broadcasting Act apply to radio and television industries. In 1999, the bureau and the CRTC signed a memorandum of understanding, which describes the role of the CRTC under the Broadcasting Act and that of the bureau regarding telecommunications and broadcasting. The document deals with a range of competitive issues, including access merger review, competitive safeguards and various marketing practices. It only deals with matters related to competition.
The Standing Committee on Canadian Heritage in the other place has recommended clarifying the roles of the bureau and the CRTC. We would welcome such a review.
[Translation]
We believe that ensuring a diversity of voices is important for democracy, and as an advocate of competition I believe that product choice is an important component to ensure such diversity exists.
However, this issue, I believe, is more cultural than economic and for that reason is a natural adjunct to the CRTC's mandate to maintain and enhance Canadian culture.
An effective policy framework requires both the Competition Bureau and the CRTC to play important but quite different and distinct roles. The dual challenge is to enable the forces of competition to work in the marketplace and not be thwarted unnecessarily by regulations, while ensuring that regulatory interventions achieve their key objectives.
[English]
Honourable senators, I hope these brief comments will be helpful to you. I would be delighted to answer questions, as would my colleague, Mr.Sagar.
Senator Graham: I want to clarify one point. As I understand it, the Competition Bureau reports to Parliament through the Department of Industry, and the CRTC through the Department of Canadian Heritage; is that correct?
Mr. Jorré: Yes, that is correct.
Senator Graham: I wish to refer to a quote that one of you made — at least, someone from the Competition Bureau made — before the House of Commons Standing Committee on Canadian Heritage in May 2002. I was rather surprised when we were provided with this particular quote. I will read it: ``We feel that the mandate of the CRTC should be clarified to specify that the CRTC has a responsibility to preserve a diversity of voices within the broadcasting system.''
Fine.
It goes on to say: ``At the same time, the CRTC review of broadcasting transactions should focus solely on the impact that mergers would have on core cultural values and the diversity of voices...'' and so on.
Then, this is what startles me.
``The CRTC should not review broadcasting transactions from the perspective of commercial viability.'' This is to quote someone representing the Competition Bureau. ``The CRTC's review should be focused solely on the impact the proposed merger would have on the attainment of the core cultural objective — namely, the production and distribution of Canadian content. According to us, its logical corollary is the maintenance of diversity of voices.''
It surprises me that you obviously feel that the CRTC should not be concerned with economic viability. I can see the CRTC reviewing an application and saying, ``Well, what will you do to promote culture in a particular area?'' However, surely to heavens, they must understand that the particular applicant must be commercially viable. It seems that you are preserving that prerogative to the Competition Bureau. Yet, the Competition Bureau is not involved in the actual licensing of a broadcasting entity. How do you square that?
Mr. Jorré: The point that was being made is that if somebody wishes to spend money to start up a broadcast station, he or she should be allowed to do so. You are quite correct, honourable senator, we are not involved in licensing, as such. However, we believe that if an individual, say, wants to set up something, the CRTC should focus on the impact of that on Canadian culture and on diversity, not whether the party will make a success of it. That should be left to the parties who want to enter into the project. That is the point underlying that.
Senator Graham: The CRTC, in assessing an application, should not be concerned about whether the market is already flooded with 5 or 10 broadcasting outlets. They should be given a licence, providing they will enhance the culture of the area. They may put someone else out of business or they may go out of business because they do not have deep enough pockets. Is that correct?
Mr. Jorré: We believe the market should decide which enterprise will survive and which enterprises or enterprises will not survive. There are some overriding objectives in this sector that the government has put into the Broadcasting Act and asked the CRTC to administer.
In normal businesses, we do not control whether an individual makes a go of it. We believe it should be the same in the broadcast sector, with the CRTC ensuring that the cultural objectives of the Broadcast Act are met.
Senator Graham: If there are 10 existing outlets you, and they object to an eleventh company applying to the CRTC for a licence in that particular area, you do not think that their objections should be taken into consideration. It is only the cultural aspect at which the CRTC will be looking?
Mr. Jorré: Yes, we believe in that respect that it should be like any other market. If someone decides to open a restaurant, we do not review in a market economy whether other restaurants already in the marketplace will be harmed.
Senator Graham: You do not come into play until after the broadcast licence is issued?
Mr. Jorré: We are not concerned with licensing, with someone starting a station. We are concerned, under our act, about whether there is a merger or acquisition, for example.
Senator Graham: Do you think you should be involved in licensing?
Mr. Jorré: No, we believe that people who wish to have licences subject to the cultural concerns in the Broadcast Act should be able to make a go of it subject to the spectrum being available.
I should like to clarify something you said at the beginning of your question. Our responsible minister is the Industry Minister, but we do not report through that department. We are an independent agency in our enforcement action.
Senator Graham: Thank you.
If you were to report to Parliament, it would be the Minister of Industry who would be the responsible minister?
Mr. Jorré: In Parliament, yes.
Senator LaPierre: It will be no surprise that I am not pleased with you any more than I am pleased with the CRTC. I find my country overburdened by ownership that limits the marketplace of ideas considerably.
It is scandalous that people will own newspapers, radio stations, television stations and other things and you still talk about a free marketplace of ideas. There is a free marketplace of ownership in this country, but there is no free marketplace of ideas.
Of course, you are not responsible for the free marketplace of ideas, are you?
Mr. Jorré: That is correct.
Senator LaPierre: Should you not be? If you are expounding the need for diversity in voices and for a marketplace that is sound and effective and in which Canadians are served, is it not your fiduciary responsibility to see to it that if one lives in Ottawa, or anywhere else with a CanWest Global Communications Corp. newspaper, that there be, even on the television station, decent coverage of the question of Palestine?
The Chairman: They are not responsible for the content.
Senator LaPierre: They are responsible for the marketplace of ideas. If you do not want the question, madam, I do not need to be here.
The Chairman: Could you answer the question?
Senator LaPierre: I withdraw the question.
The Chairman: There is a good question about the marketplace of ideas there.
Senator LaPierre: I withdraw it.
Mr. Jorré: This entire issue of the diversity of voices is a very complicated and difficult issue. The Competition Act and our method of working are an economic statute. They are not suitable instruments for dealing with these questions.
They are very important questions in this democracy, but they are not questions that you can deal with through our act. Our act is focused on questions such as this: What is the impact on prices of certain economic behaviour? What should be the product choice to some extent? However, there is a huge difference between product choices, to the extent that you can analyze it, and diversity of voices. You can only look at major differences in product choice, if I can say it that way. Our act and our entire method are simply not suitable for trying to deal with such issues.
[Translation]
Senator Corbin: Mr. Jorré, can you tell us why you are Acting Commissioner?
Mr. Jorré: As you may know, the previous commissioner, Konrad von Finckenstein, was appointed to the Federal Court Trial Division August14. I will be the Acting Commissioner pursuant to and order in council, until such time as the government appoints a new commissioner.
Senator Corbin: And are your statements today in the same vein as those the former commissioner would have made had he remained in office?
Mr. Jorré: I don't believe there are any contradictions between what I have said and what Mr. von Finckenstein has said in the past.
Senator Corbin: Give me some information about your office. How many people work there?
Mr. Jorré: You mean the people who participate in our activities?
Senator Corbin: Yes.
Mr. Jorré: I would say that there are between 380 and 400people who participate in our activities, but I am not sure.
Senator Corbin: The numbers fluctuate like the stock market.
Mr. Jorré: They fluctuate. I will have to ask someone for the exact figure.
Senator Corbin: What is your annual budget?
Mr. Jorré: Last year, I believe we spent 43 or 44million dollars.
Senator Corbin: If you set aside salaries, benefits, et cetera, what part of your budget is allocated to investigations?
Mr. Jorré: In all areas, the majority of our budget is allocated to applying the law. I would have to do a study to give you precise figures. But I insist on the fact that this applies in all areas.
Senator Corbin: How long has the act you apply been in effect?
Mr. Jorré: The act has been in effect for approximately 100years. Its current form and main provisions go back to the mid-90s. For instance, there were no merger reviews before the mid-80s. This was strictly a criminal matter before that date. The act has been in existence for 100years, but its new provisions were brought in 15 or 20years ago.
Senator Corbin: What led to the inclusion of mergers in your mandate?
Mr. Jorré: At one time, the law that applied was strictly criminal. We could not, with a criminal provision, adequately examine and defend competition in Canada.
Senator Corbin: Do you think that it would be advisable to review the current act you enforce?
Mr. Jorré: We have prepared a discussion paper proposing a certain number of amendments. The Public Policy Forum is currently holding a consultation concerning that discussion paper. There have been ten amendments brought in in the regular way over the past few years and there will certainly be others in the years to come.
Senator Corbin: Do those amendments concern public interest or the internal workings of your shop?
Mr. Jorré: They concern matters of public interest. Several topics are being discussed. For instance, the possibility of making major changes to the provision against cartels.
Senator Corbin: From your presentation, I got the impression that you are only concerned with financial considerations.
Mr. Jorré: The Competition Act is a piece of financial legislation.
Senator Corbin: So the interests of the Canadian consumer does not concern you?
Mr. Jorré: It is in the interest of the consumer that we have a competitive economy. Prices will be higher and choices more limited if we do not.
Senator Corbin: Do ordinary consumers come to you to submit their concerns or are your clients strictly made up of owners, broadcasters, et cetera?
Mr. Jorré: We do not have clients as such. There are different aspects to your question. We have all sorts of various provisions for instance against false advertising or fraudulent telemarketing. These complaints, of course, originate with people who have suffered from false advertising, et cetera.
Senator Corbin: So, the ordinary consumer?
Mr. Jorré: Yes. We receive approximately 80,000complaints per year in all areas. In the case of the merger of two businesses, there is a system that obliges them to notify us of transactions above a certain threshold. We must examine such mergers pursuant to the act.
Our work is to protect competition and therefore to protect the consumer. I fail to see how an economy that fosters better competition would not be good for the consumer.
The Chairman: We could move on to the second round?
Senator Corbin: I am getting to my main point. You will see that my reasoning is logical. I was losing my train of thought. Out of the 80,000complaints that are submitted to you every year, how many do you accept under the terms of your mandate?
Mr. Jorré: We can only carry out a small number of investigations in the course of a year. But we do a fair number.
Senator Corbin: Even with a budget of 44million dollars and 380people! So, you are not focusing on that aspect sufficiently, that's clear!
Mr. Jorré: We can provide you with figures on the number of investigations. We have an annual report that describes the work we do. We do a lot of different things in different areas.
Senator Corbin: This report only gives an approximate idea of the work that is done in your office. It is not a detailed report. You are subject to the general annual report criteria that apply to all departments. So the consumer does not have a very specific idea of what goes on in your office. I can understand that. But it leaves a great deal to be desired. You spoke of your role as advocate. Can you elaborate on that?
Mr. Jorré: We are the advocates of competition. In statutory terms, we have the right to appear before tribunals such as the CRTC or other administrative tribunals to defend competition. We have intervened frequently in the telecommunications area on issues related to encouraging competition in telecommunications.
Under the law, we can also intervene to encourage competition in provincial bodies, with the province's permission. We have often been asked to intervene to give our point of view on competition matters, for instance in the energy area.
Senator Corbin: One thing bothers me. Agencies that regulate the interests of consumers and Canadian owners seem to have a right hand and a left hand. Generally speaking both of them cannot seem to agree on what constitutes the fundamental interest of the Canadian consumer. On one hand, you seem concerned mostly by the interests of owners, broadcasters, et cetera. On the other hand, you seem to relegate everything else to the CRTC, where culture is concerned.
Is it an intelligent approach in a democratic society to function in this disjointed way? Would it not be a good idea to merge the Competition Bureau and the CRTC into one single organization so that when they examine a problem they can determine all of the aspects of a given issue: the point of view of the consumer, of culture, and of Canadian nationalism, for lack of another term. Would it not be better to have a single agency rather than operating in this disjointed way?
Mr. Jorré: We are not disjointed. I will address the beginning of your question first. We have no other interest aside from competition. We do not promote the interest of owners or of consumers: we act as advocates of competition.
Senator Corbin: Culture does not interest you?
Mr. Jorré: Our statutory obligation is to promote competition. Competition is to the advantage of consumers and the Canadian economy. Let me give you an example. We worked on one case, Superior Propane, which went on for years. We spent millions of dollars on that case.
The effect we were after was to protect propane consumers from price increases. This was to the advantage of all purchasers, be they consumers or businesses. Our purpose was to help the economy. We need an effective economy and in this way we help the consumer. This is the consequence of promoting competition.
As for merging everything, I think that competition is highly important and is in the interest of Canadian men and women. Consumers deserve a dedicated advocate of competition to protect their interests in an economy that functions effectively.
Senator Corbin: Gas is one thing, but the media are something else. This committee is concerned with the state of the media in Canada.
Mr. Jorré: Our act is not directly concerned by diversity; it is an economic act with another objective.
Mr. Peter Sagar, Deputy Commissioner of Competition, Competition Policy Branch, Competition Bureau, Industry Canada: One principle is important. The Competition Bureau focuses on competition specifically. We have the expertise, the act is clear and specific, and our experience applies to any industry, be it the media, telecommunications, broadcasting, or newspapers; we apply the same principles to all industries. We take into consideration all of the important matters for that industry.
[English]
We do not ignore the special elements of an industry. In the case of media, we do take into account the readers, the suppliers, the journalists, as well as the advertising market. It has happened that, most often, advertising is the biggest part of that equation, but we do not ignore the rest.
We believe, as stated by the acting commissioner in other places, that it is really important for us to focus on the things we can do well, and for the CRTC to focus on the things they do well. We benefit from specialization in the application of our laws and acts. By trying to mix quite different preoccupations, quite different public policy targets, we end up with a ragout. A ragout can be very good, but you never know what ingredients went into it. We think it is important, for transparency and effectiveness, that we have clarity in this process. We are good at what we do, and we believe the CRTC is good at what they do. We want to make sure that we continue doing it in a way that lets the market develop and diversity bloom. They can pursue their cultural and diversity objectives, and we will pursue ours, and they will go together quite nicely.
Senator Johnson: Given the relatively small size of the Canadian market, are there grounds in terms of economic efficiency for having highly concentrated media industries here?
Mr. Jorré: I am not in a position to answer your question. One would have to study it as to whether you have scale economies that would arise by being more concentrated. I must say that, while we are not in a position to answer, it is not something that has come up when we have been looking at these transactions. There is nothing in what we have seen in the transactions we have looked at to date that would suggest that that was an issue. However, that is only speaking from what we have seen and the transactions we have examined. I am in no position to answer your question generally.
Senator Johnson: Media firms in Canada tend to be closely held. As you know, the majority of voting shares are held by individuals and members of the same family. Does this pose any potential problems in the media sector?
Mr. Jorré: In that, it is no different from all sorts of sectors; some have closely held companies, others do not. From a competition perspective under our law, I am not sure that I can make any general statements about whether that has an impact for media. The only thing I do know, as I said before, is that I think you will get more product choice with different owners, different forms of ownership and other things. That may help diversity; but beyond that, I am not sure I can assist you.
Senator Johnson: What about the area of foreign ownership restrictions in the Canadian media? If they were reduced or eliminated, would Canadian news become less diverse and more American? What is your view?
Mr. Jorré: I am not sure I can answer for you what the specific effect on news content would be. We favour a liberalization of ownership in general in all the economy. There are some advantages, and one of the major ones, which you see in any industry in Canada with foreign ownership restrictions, is where you have ownership restrictions you often have a limited number of buyers. That is true, for example, here in airlines as well as in media. If someone is trying to sell, and you have a limited number of buyers, it increases the chance that you will have a transaction that will increase concentration within the industry here because you do not have access to another pool of buyers outside. For us, in many situations, I think we would see it as a distinct advantage if you had a greater pool of potential buyers, because you might avoid some of the transactions that are further concentrating industries.
The Chairman: There is an attractive purity, almost an elegance, to the view that your role is purely economic and therefore you focus essentially — although I take Mr. Sagar's qualification — on advertising in matters of media markets and that someone else, the CRTC, should look at other elements. However, I was struck by your statement, very early on in your prepared remarks, that you use an analytical framework common to all products and services. Then you went on to say that you look at individual differences among industries — but, still, a common analytical framework. It seems to me when you are looking at the news media — not entertainment in the general sense, but the news media — you are, as a matter of law, not looking at an industry like the others. I say that because it is, to my knowledge, the only industry that is given protection under the Constitution of Canada, which guarantees freedom of the press. That has enormous ramifications, and we are glad it does that. That already, it seems to me, would provide a substantial legal argument that this is not an industry like the others. It is not just a ``question de piastre,'' as Senator Corbin said, even though we understand the first duty of a free press is to be independent and survive financially— make a profit.
There is that element, and then there is the equally pure and elegant argument that you only look at economics and that someone else should look at everything else and that that should be the CRTC. However, the CRTC has never had any mandate to look at newspapers, only at broadcasting. Indeed, I would think there might be some public furor if it were given a mandate to do so, given their interventionist role in terms of setting up quite strict rules about content of broadcasting ventures.
The pure and elegant argument ends up leaving an enormous void — that when you examine mergers, cross-media deals, concentration of one sort or another, it is like ignoring the elephant in the middle of the room. I am sorry I cannot follow you there. Can you clarify this matter for me?
Mr. Jorré: You are, of course, correct that the CRTC has no mandate on newspapers. In cross-media transactions, they can look at the broadcast side of it. Let me step back to why the issues of concern to you do not really fit within our act nor are suitable for fitting within our act.
We always say we can look at price, selection, quality, service — there is a point where product choice and diversity may meet. If you have two newspapers in one city and one buys the other and you are into one, especially if they are quite different, then you have a reduction in product choice and you may have a reduction in diversity. If you bring together, say, the Ottawa Sun and the Ottawa Citizen, resulting in only one and in one format, there is a distinct diminution in product choice — and also in diversity of views.
We can look at questions such as product choice, but the economic nature of the act and the tools that we have are not really suitable for dealing with the much more difficult questions that diversity of voices entails.
There are very difficult questions of whether you have as much variety of opinion as you should have. You are looking within the context of a particular media paper or broadcaster. Those are much more difficult and subtle. I do not believe they are susceptible to competition analysis, even if you could set out a clear objective for us. They are much better dealt with in a different kind of forum.
The CRTC seems to be the obvious place for broadcasting. The honourable senator is correct that there is an issue with newspapers and the government. Parliament may wish to consider whether, if it wishes to do something, it should create some mechanism to do it.
We are not equipped. The act is not equipped to deal with this kind of issue, other than in the most brutal terms where you have, for example, two papers becoming one. If you have two papers becoming one, you probably also have problems in advertising markets as well.
The Chairman: Someone else must look at the elephant.
Mr. Jorré: You need different tools and mechanisms to analyze this.
The Chairman: I do understand your argument.
Let me ask a hypothetical question about your mandate. I am not predicting that this is about to happen. Suppose, for the sake of argument, that we look across Canada and notice how many cities are one-paper communities. If a single person bought all of those papers, there would be no greater concentration in each community because the same paper is still there.
Would you consider that to be a problem under the terms of your legislation? I am taking this to the extreme.
Mr. Jorré: You must look at the issue of the nature of the relevant markets. If you find that they are all local, then it does not really change.
If there were a national market and only the one owner, it may have an effect on buyers of advertising in the national market who no longer have any choice whatsoever. You would have to explore that. That may raise issues.
Also, it could raise issues upstream for suppliers to newspapers— the people selling them newsprint and content. You would have to look at the upstream issues as well.
The Chairman: What about employment? Let us say, for example, that I have decided that I do not want Ph.D.s in economics or whatever, that I have some bias against some class of people, and decide not to hire them. What will you do about that?
Do you look at that? Do you look at the implications of employment becoming restricted?
Mr. Jorré: The act does not look at the effects on employment of a transaction. It is not part of the mandate under the act. There may be human rights legislation issues in what you describe.
The Chairman: From your point of view, essentially, it is a matter of who gets to make money and on what terms. Is that correct?
Mr. Jorré: I would say very importantly so. Also, it is a matter of ensuring that there is a competitive marketplace. If you are to have an efficient, effective economy, you need a competitive marketplace. If, ultimately, customers and consumers are not to suffer, you need a competitive marketplace.
We would look, as well, at the impact on prices of products where that has an effect. Movie theatres are still in the more classical model of a market. The effect on the customer is a consideration since it is not really advertising-driven to the same extent.
Senator Graham: I wish to follow up with respect to the point raised by Senator Johnson on foreign ownership and ask whether the bureau has any official position with respect to foreign ownership.
Mr. Jorré: There is one thing that we have said very clearly that is very important. If changes are made, because there are rules both in the telecom sector and the broadcast sector, any change should be in parallel.
Currently, you have a number of companies that are in both sectors. If you change one and you do not change the other, then you would potentially cause a series of reactions as a result. For example, if telecom were opened up but not broadcasting, you would have to split the two parts of a company in order to take advantage of one but not the other. We have said very clearly that those should move in parallel.
We generally favour liberalization. There are overriding issues for Parliament and the government.
Senator Graham: I want to go to a document entitled ``CRTC/Competition Bureau Interface.'' I understand that the Competition Bureau and the CRTC agreed to this document in 1999. It was to provide the industry stakeholders — and the general public is a stakeholder — with greater clarity and certainty as to the regulatory part and the framework governing the telecommunications and broadcasting sectors.
The document, I believe, noted with respect to merger reviews that there is a ``parallel jurisdiction.'' We are familiar with the proposed acquisition by Astral Media of some French-language radio stations owned by Télémédia. The CRTC approved the transaction. During the course of those hearings, the Competition Bureau opposed the transaction for presumably valid reasons according to the mandate.
Setting that aside, how is this ``Interface'' document working at the present time? Does it come into play?
Mr. Jorré: It sets out our respective roles. In the case of acquisitions in the broadcasting industry, you have two different mandates and two different processes to be followed. This is not something that is unknown.
I will give a simple example. If you are building a building, you may have to comply not only with zoning but also with environmental regulations. In a similar way here, you must ensure not only that your transaction does not raise competition concern but also that you meet the requirements of the CRTC.
Senator Graham: I come back to my original question: Do you still believe that the Competition Bureau has no place in the bedroom of the CRTC with respect to licensing?
Mr. Jorré: Let me explain. Our act is framework legislation for the marketplace. It is part of a number of legal instruments in an economy to set general rules for the marketplace. Contract law is part of the framework; general corporate law in incorporating companies is; our act sets a general framework.
The CRTC is a sectoral regulator with a specific role. Those are two very different functions that I believe belong as separate functions. A competition framework is needed, and you need an advocate for competition, which is a very different role, and I do not believe you would want to combine those two. As such, as framework legislation, we do not license new businesses in any area, nor do I believe that we should be involved in the licensing of new broadcast entities. That is not part of the framework because that is a sectoral issue.
Senator Graham: There is never a situation or a case in which the Competition Bureau would give an opinion to the CRTC before they would grant a licence. Is that correct?
Mr. Jorré: I am not aware of our having intervened in a licensing application. We have intervened in front of the CRTC to make our views known in telecommunications on the structure of deregulating telecommunications. It is difficult for me to imagine a circumstance in which our role as competition advocate would cause us to intervene on a licence application, because I do not think that falls within setting a framework. It is not like rules for, say, unbundling communications services so that entrants could obtain access to certain parts of the telecommunications system. It is difficult for me to envisage that there could be such a situation. I do not believe that we belong in the process of issuing new licences.
[Translation]
Senator Corbin: How do you function? Do you automatically investigate all acquisitions or do you only act on the basis of complaints you receive?
Mr. Jorré: We must be advised of all acquisitions of a certain size pursuant to the act. We review all of them. They are almost all important transactions in the Canadian economy. If there is no obligation to advise us of the transaction, we can still examine the transaction from the three aspects of the closing of the transaction. We do not examine all transactions that we are not advised of.
Senator Corbin: What triggers the review? The size or the importance of the transaction?
Mr. Jorré: Under the law, if the transaction exceeds 50million dollars and if the size of the partners exceeds 400million dollars, we must be advised of the transaction.
Senator Corbin: You do not look at the majority of transactions in New Brunswick, for instance. In the New Brunswick media, there are no operations above and beyond the 50million dollar threshold. However, there could be monopoly or quasi-monopoly situations. You have no interest in that matter?
Mr. Jorré: That could interest us, but there is no obligation to notify us. We do not systematically review all of those transactions. It can happen that people direct our attention to certain transactions. For one reason or another, a transaction we were not advised of is brought to our attention, and we may examine it. There have been transactions of that type where not only have we carred out a review, but we caused changes to be made after the transaction. There has to be a threshold, practically speaking, because we cannot expect to be notified whenever one store purchases another.
Senator Corbin: There is something missing in that criterion, especially where the smaller provinces, the have-not provinces, are concerned, where the media do not reach the threshold to meet the criteria you have just described. Does it not worry you that a holding, an owner, could control three quarters or more of the media in New Brunswick? And because the operation does not meet the size criterion, you would not investigate?
Mr. Jorré: We can carry out a review of a transaction that is not subject to notification. If it is drawn to our attention, if someone makes a complaint and if we believe that it would be worthwhile to carry out an investigation, we do that. However, this is not automatic. When there is notification, however, it is automatic.
[English]
Mr. Sagar: Senator, if I may carry on briefly, there are two elements that I would focus on. First, in the event that you have that kind of dominance of an industry, parts of the Competition Act would govern how that firm may behave. They would not be allowed to abuse their dominant position. If we find them doing that to prevent entry into the market or to exploit their clients or customers, we have specific laws that apply. We also have, before our consultation process on the amendments, the suggestion that we have the ability to refer for inquiry into the broad state of competition in specific sectors. We do not currently have that capacity, in our act, to do such inquiries. It has existed in the past and it has been suggested by the industry committee in the other place that we have that authority to refer for inquiry. We have suggested, for example, that we could ask the Canadian International Trade Tribunal, which has economic expertise and powers of inquiry, to conduct an investigation on our behalf. We believe that would be useful in those cases that you refer to— hypothetically, of course— where there does appear to have been an undue amount of concentration and, perhaps, a breakdown in market forces.
Senator Corbin: I am hopeful that the committee will retain that comment and suggestion, Madam Chair.
[Translation]
Senator Corbin: I would like to discuss another aspect of your operations. As you know, this committee is concerned with the media. If you received a complaint according to which because of recent acquisitions there existed a quasi- monopoly of the press in New Brunswick by a holding, would you limit your review, your considerations strictly to the media sector of that holding? Would you broaden your examination to consider the fact that that holding was the owner of a pulp and paper mill, that it can produce pollution that has an adverse effect on the health of residents, that it owns vast forests, chains of hardware stores, grocery stores, radio and television stations, refineries, ships, and was until recently involved in naval construction and owned a vast network— not only in one province, but throughout the eastern continent— of gas stations and convenience stores, and so on? Would you take all of that into account in your consideration of the adverse effects of a media quasi-monopoly on the interest of consumers?
Mr. Jorré: As I said in my opening remarks, in our review we consider the likely impact and changes that may result from an acquisition. If we are considering the acquisition of another newspaper or another radio station, we examine the impact this would have on the market. We can also study links with other parts of the business, but our review is limited to the impact of that acquisition.
We cannot study a concentration which existed prior to the acquisition. I will give you a very simple example. In Vancouver, 40 or 50years ago two daily newspapers were acquired by the same owner. When these newspapers were purchased by CanWest Hollinger, we only studied the change, i.e. the acquisition of newspapers by a broadcaster. But since the two daily newspapers in the city of Vancouver already belonged to the same owner, our act did not allow us to examine that circumstance, but only the consequence of the acquisition.
Senator Corbin: I think there are some aspects missing here.
The Chairman: Like any other topic, the more we examine it, the more complex it becomes.
[English]
Senator Graham: I have a question arising from Mr.Jorré's last comment with respect to the questions that were asked by Senator Corbin. In the British Columbia, Vancouver case, what was your conclusion? You made a study of it, what was your conclusion?
Mr. Jorré: We found in that transaction, as I said, that broadcast and print were in different markets. As a result, you may recall that the only remedy we sought in that transaction was in relation to common ownership of ROB-TV, where, if there had been no change— I am just trying to remember— there would have been common ownership between the CanWest group and someone else. If you could give me a moment.
The Chairman: I will interrupt here — I usually save these requests for the end of the hearing so as to maintain the witnesses in good humour. It will involve what I suspect may be a voluminous set of documents from you. To wit, I think it would be useful for us to have a detailed summary, an explanation of all of the work you have done in connection with media enterprises of one sort or another. We would be interested in the cases you have examined, the court cases you have launched, whether successful or not, decisions you have made not to intervene, reasoning, conditions, over the past 30 to 35 years. This should go back to the Irving case. There was an Irving case a long time ago. I am trying to place that in my mind, but certainly that should be included. There have been many other instances, I know.
Would that help you, Senator Graham, to have that?
Senator Graham: Yes, it would probably help fill my school bag.
The Chairman: It would be a lot of reading, but it is important for us to understand what has been done.
Senator Graham: I do have a final question. Obviously, over the years, you have looked at other countries and you have visited with other countries and people who were in the same kind of business, if you will, as you are. How do other countries reconcile conflicts between competition policy and media policy? Could you give us examples?
Mr. Jorré: I can tell you that in the major countries, for competition authorities, the situation is the same as with us. For example, in the United States, the Federal Trade Commission and the Antitrust Division of the Department of Justice look at media mergers from the same perspective we do. As well, I believe it is the Federal Communications Commission that has some rules about limits of ownership of broadcast media and so on.
There are some exceptions. In the United Kingdom, there are some special criteria that have been added into the legislation for reviewing newspaper transactions. There, it is somewhat different.
Mr. Sagar: Honourable senators, if it would help you, I would refer to our colleagues from CRTC who have actually put together a quite useful study on the merger review or diversity and control of media in different jurisdictions in Canada, U.S., Australia and France. In most of these jurisdictions, I understand, there is a separate competition and media review, as in the United States, in FTC versus FCC — Federal Trade Commission versus Federal Communications Commission split in power. That tends to exist in most of the countries. It is a standard practice. Most of them have various limits on cross-media ownership, media concentration in different cities. As honourable senators will be aware, in the United States there are strict limits on the extent to which a single owner can have outlets in different places.
Senator Graham: Perhaps, Madam Chair, in your list of papers that you are asking for our school bags, you might ask the witnesses to provide us with some information as to how these things operate in different countries.
The Chairman: Anything you have would be a useful addition to our homework. We shall, indeed, ask the CRTC for anything they have; and our own staff is also working on these issues.
The U.K., Senator Graham, has a new law. It is this thick. They do not believe in clarity of language in legislation to the same extent that we do. It is a major undertaking, but we will ensure that before this study concludes we understand what other countries are doing. We need to do that.
Mr. Jorré: On your question of material, we will see what we can find. I know there is a study — hopefully, we can find the citation — that was done by an institute in Oxford of European media legislation. I do not know if we still have a copy around, but I hope we can find the citation.
On your question, we will be delighted to send you what we can. I should just comment that we can only provide you with what is in the public domain. When we do not act, there is not much in the public domain. I think the Irving case, by the way, was in the 1970s. I will point out that the Irving case, which involved the ownership by the Irving family of every single English-language newspaper in the province of New Brunswick, was back when the act was entirely criminal. The case was taken by the Competition Bureau — or its predecessor, the Director of Investigation and Research— — all the way to the Supreme Court of Canada, which held that a criminal monopolization case was not made out. That was before we had any civil merger review positions.
The Chairman: Thank you. Indeed, we are not asking you to break confidentiality requirements. However, for example, you have just pointed out to us your reasoning in the case of the Vancouver market. I think all of that is already in the public domain; so anything that you can give us would be extremely helpful for us as we try to deepen our understanding of what is going on.
Mr. Jorré: We would be delighted.
Senator Johnson: You are an independent law enforcement agency through which Canadians enjoy the benefit of a competitive economy. That is generally your mandate. You operate within a legislated framework.
Do you have the latitude to do the work you feel is within your mandate given the marketplace today and the shifting sands of the media environment? Do you feel that your mandate and framework are adequate for dealing with the situation in the media world in which we are living today?
Mr. Jorré: In terms of what the law asks us to look at, the law is suitable for the review of merger transactions. We have the analytical tools to deal with it in an economic sense. Yes.
Senator Johnson: That aspect of it is working well for you?
Mr. Jorré: Yes.
Senator Johnson: It could very well change with the times, could it not? Is there anything you can see that would enhance it? One wants to go back 35 years; I want to go ahead 35 years.
Mr. Jorré: The framework is not rigid insofar as the general principles that apply to the market as you find it. It is always applied to the evolving market. You do not really need to change our law to deal with a changing market because the law itself is framework. It is not a rigid set of rules.
Mr. Sagar: We are consulting on amendments to the act to strengthen the civil provisions. If someone engages in a pricing practice that is against our civil provisions, the tribunal can only say, ``Stop it.''
We have worked very hard to make the practices clear. There is no excuse for businesses to be going against them now.
It has been recommend that the tribunal have the ability to impose administrative monetary penalties and that consumers have the right to restitution and the ability to take civil action. These steps would bring the act up to date and give it greater effect. Consultation is underway on those.
Senator Johnson: Particularly for the consumer.
The Chairman: The Canadian market is not large, certainly notin comparison to our nearest neighbour and the other G7countries. Given that we are not that big a market and that we are next door to a gigantic neighbour, are there more economic grounds in Canada than there might be in some other countries for allowing a greater degree of concentration of ownership or of cross-media ownership?
Mr. Sagar: Generally, you would have to examine it on a case-by-case basis. There is no a priori reason to believe that there is not sufficient scale in Canada to support a strong industry. We have seen an expansion of the cultural activities, which have been aided and abetted by government policies and CRTC efforts to bolster these things, including licensing restrictions and the funding of production. These things can all help.
Virtually every advanced western economy has a program of support, with the exception of our friends to the South, which has other advantages that are being exploited. We can, and do, have a very vibrant broadcasting system with a significant amount of Canadian content.
People are more or less happy with that, but is that an indication that we do or do not have the scale? We probably do have the scale to deal with that.
The Chairman: It has been suggested before this committee, and I am sure elsewhere, that the great public policy trade-off decision made some time ago was that Canada would exclude foreign ownership from its media. In exchange, we would have more concentrated ownership and more cross-media ownership than is permitted in some other jurisdictions.
You have suggested, with due circumspection, that it would be well worth allowing a greater degree of foreign ownership. If that were so, do you think there should be a new trade-off?
Are you saying that the seesaw should shift and we should have more foreign ownership and less local concentration, or are you saying that you are in favour of an easing of restrictions?
Mr. Jorré: There are advantages to liberalization. Often, for someone selling significant assets— broadcast or newspaper assets— there are not many buyers. There is a strong chance that the buyer will be another big media enterprise, which raises many issues. If it raises issues under our act, we will ensure that competition is maintained. If for other reasons the government wishes a more diverse ownership, you should have more potential buyers in order to potentially have a sale to someone who does not have the same amount of media assets in this country. That is certainly a potential advantage. Weighing that with all the greater issues is really a question for Parliament and the government to consider in light of where you want to go.
We see in all the industries with ownership restrictions, broadcast or otherwise, that when you are trying to find another buyer the possibilities are often quite limited. That is not helpful in maintaining competition. There would be better solutions from a competition perspective, if you had these other buyers available.
The Chairman: I understand that neither of you wants to commit your institution. Let me ask you both as citizens, would you be in favour of unrestricted foreign entry into the news media, or do you think there should be a greater liberalization with some control?
Mr. Jorré: I have to answer that in my position as acting commissioner. I am not here as a citizen.
Those are very important policy questions that really are for Parliament and the government to decide, not for me speaking as Acting Commissioner of the Competition Bureau.
The Chairman: Mr. Sagar, do you want to take a whack?
Mr. Sagar: Let me answer not as a citizen but from a public policy point of view. In answering that sort of question you have to ask yourself if you are accomplishing that which you want to accomplish through limits on foreign ownership? Is it helping you get what you need, or are you suffering the loss of the limits without obvious gains? Do you have more efficient tools to accomplish your end?
For example, could you protect our cultural diversity and Canadian national identity strictly through licensing requirements, broadcast content and promotion of film and television products? If so, you are suffering the economic costs of restricting ownership for no real gain. That is probably not a smart thing to do. You are also losing the potential diversity of foreign owners entering the market and bringing other ideas, technologies and content to you.
However, those are public policy question that must be asked. Is this an effective tool? Do you have better and more efficient tools to accomplish the same thing? That is why you are senators and we are witnesses.
The Chairman: Thank you very much.
[Translation]
Mr. Jorré and Mr. Sagar, thank you very much, this has been very interesting and we are grateful to you for your openness and for sharing your expertise. We will await the documents you will be sending us with anticipation.
The committee adjourned.