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THE STANDING SENATE COMMITTEE ON BANKING, TRADE AND COMMERCE

EVIDENCE

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OTTAWA, Wednesday, May 11, 2022

The Standing Senate Committee on Banking, Trade and Commerce met with videoconference this day at 6:30 p.m. [ET] to study the subject matter of elements contained in Divisions 5, 10, 11, 15, 16, 17 and 30 of Part 5 of Bill C-19, An Act to implement certain provisions of the budget tabled in Parliament on April 7, 2022, and other measures.

Senator Colin Deacon (Deputy Chair) in the chair.

[English]

The Deputy Chair: Good evening, everyone, and welcome to this meeting of the Standing Senate Committee on Banking, Trade and Commerce. Before we start, I would like to remind senators and witnesses to keep their microphones muted at all times unless recognized by the chair.

With that, let’s get started. My name is Colin Deacon. I’m an independent senator from Nova Scotia, and I’m honoured to be deputy chair of this committee. Tonight, I will be chairing our meeting.

I would like to introduce you to members of the committee who are participating in today’s meeting: Senator Bellemare, Senator Gignac, Senator Loffreda, Senator Marshall, Senator Ringuette, Senator Smith and Senator Woo. We believe we will be joined shortly by Senator Massicotte and Senator Yussuff. As well, I believe we’re joined this evening by the sponsor of Bill C-19, Senator Moncion.

Lastly, I believe we’re also going to get a special guest. Long-time member and former chair of this committee, Senator Wetston, will join us tonight at the beginning of our meeting. We are all really grateful for his efforts in elevating the importance of a review of the Competition Act through his extensive work beginning last summer and consultation through the fall. A really warm welcome from all of us back to this committee for Senator Wetston.

Tonight, we’re going to be continuing our examination of the subject matter of certain elements contained in Divisions 5, 10, 11, 15, 16, 17 and 30 of Part 5 of Bill C-19, the Budget Implementation Act, 2022.

In this meeting, we’re going to focus on Divisions 10 and 15. To discuss Division 10, we have the pleasure of welcoming Michael Mignardi, Corporate Secretary from the Banks and Trust Companies Association. He is also General Counsel at Equitable Bank, and a Director of Equitable Trust.

To discuss Division 15, please welcome Jennifer Quaid, Associate Professor and Vice-Dean of Research in the Civil Law Section at the University of Ottawa; Benjamin Dachis, Associate Vice President of Public Affairs at the C.D. Howe Institute; and Bob Fay, Managing Director of Digital Economy Research at the Centre for International Governance Innovation.

Thank you, all. I welcome you this evening and I’m glad you are joining us.

We will begin with an opening statement from Mr. Mignardi, to be followed by Ms. Quaid, Mr. Dachis and then Mr. Fay. Mr. Mignardi, the floor is yours.

Michael Mignardi, Corporate Secretary, Banks and Trust Companies Association, General Counsel, Equitable Bank, and Director, Equitable Trust: Thank you, Senator Deacon. Hopefully, everyone can hear me okay.

Good evening. My name is Michael Mignardi and I’m representative and Corporate Secretary for the Banks and Trust Companies Association, which is an association of small- and mid-sized financial institutions in Canada under the Canada Not-for-profit Corporations Act. I am a Director of Equitable Trust, a federally regulated trust company under the Trust and Loan Companies Act, and General Counsel of Equitable Bank, a bank under the Bank Act. I appear today on behalf of those entities.

We have reviewed and considered the changes contemplated by Bill C-19, and in particular those in Division 10 which, among other things, modernizes corporate governance communications of financial institutions. We have reviewed the proposed amendments to the Trust and Loan Companies Act in particular and think, by and large, they are appropriate and welcome changes and we are supportive of those proposals.

For additional context, I would add that we are generally supportive of anything that encourages shareholder participation and engagement. We think overall those are necessary elements of good governance. The proposed amendments appear to do that and bring the regime under the Trust and Loan Companies Act in line with other similar requirements today under the Canada Business Corporations Act and securities rules, for example, for soliciting proxies.

The proposals appear to remove some of the administration and makes the overall approach a bit more flexible, and we are supportive of that and a more harmonized regime relating to proxy solicitation rules.

As a final point, I would just note that we understand that there are changes to the Competition Act being discussed here today as well. Our comments are limited to Division 10, but we would be open to discussing more about any pro-competitive changes in banking and financial services at a higher level as necessary.

Those are the end of my prepared remarks. Thank you.

The Deputy Chair: Thank you very much, Mr. Mignardi. I will now go to Jennifer Quaid, if I could, please. Thank you very much.

[Translation]

Jennifer A. Quaid, Associate Professor and Vice-Dean, Research, Civil Law Section, Faculty of Law, University of Ottawa, as an individual: Mr. Deputy Chair and honourable senators, my name is Jennifer Quaid. I am an associate professor and associate dean of research in the Civil Law Section at the University of Ottawa. My areas of expertise are corporate criminal law, competition law, anti-corruption law, business law and general criminal law. It is with great pleasure that I appear before you today to discuss Division 15 of Bill C-19. It is important that you give it careful consideration, although the legislative process will undoubtedly proceed expeditiously.

I will be direct. There is no doubt that the proposed amendments to the Competition Act are substantive amendments. They may be in a budget bill, but they are being proposed with a clear objective to initiate competition law reform. According to government statements, Division 15 is only the first draft of a two-stage reform. Division 15 is the preliminary phase. The second phase, the timetable for which is not yet known, will be preceded by a public consultation designed to sound out all interested parties on the role of competition policy in the 21st century, particularly in relation to the digital transformation of the economy and our society. I’ll be happy to talk to you about the broad outlines of what should be considered at this second stage, during the question period.

In this opening statement, however, I will only be targeting the proposed changes in Division 15, and I will be talking specifically about one change that I am concerned about, but of course, I can talk about it in detail afterwards; I am aware that I have limited time in the opening statement.

Division 15 proposes eight changes. Four of these were widely expected, as both Minister Champagne and Commissioner Boswell had made specific reference to them in their public statements. These are the addition of a provision creating the offence of conspiracy regarding employment in section 45, then changing the maximum amount of certain fines and administrative monetary penalties, adding a provision clarifying that the use of partial prices constitutes a false or misleading representation, and creating a private right of access to the tribunal in respect of abuse of dominance.

Then there are four other amendments that perhaps did not surprise me, but were not necessarily expected. These are the amendments to sections 78 and 79, which deal with abuse of a dominant position, the addition of elements to be considered in the determination of a prevention or substantial lessening of competition, so sections 79, 90.1 and 93, the addition of a general anti-avoidance provision in relation to the merger notification process, and amendments to section 11, which is a document request power.

The government’s view is that there is consensus on most of the proposed changes, at least among those who have spoken out publicly, including in the consultation by your colleague Senator Wetston, in which I participated.

[English]

This allusion to consensus suggests that the inclusion of these changes in the budget bill should not be of great concern as few will disagree with the proposed provisions.

I could not disagree more. While the Competition Act is in need of reform, and urgently, because our international peers are also struggling with these same issues and are way ahead of us, the budget bill process is unlikely to be conducive to a thoughtful reform even on these issues that some may consider low-hanging fruit.

It is important to modernize the act. But if we do it poorly and without consideration of the bigger picture as well as the technical issues, we risk simply changing the law without making competition policy any better.

I would stress that there is the question of the larger transversal need of a whole-of-government approach to responding to the digital challenges of today. I put that out there. I’m happy to speak to that, but that is a really big concern. Today, we’re talking about technical amendments, but I think we need to stress that.

I would say that nowhere is the need for thoughtful consideration more important than the decision to add a paragraph prohibiting conspiracies, agreements and arrangements to fix prices and not to solicit employees — sometimes called “no poaches” — in section 45. I had a lot to say on this, but I’m conscious of the time. I would simply like to put on the table for discussion that it is very unclear to me that this is the correct solution to the problem as imagined. I worry deeply that we are trying to use the criminal law for something that it is not designed to do.

Moreover, given the way that our criminal law and particularly our corporate criminal law are structured, something that I have done a lot of research on, I think that this provision will be highly problematic. We are making a promise to protect and help workers, but that is not the way that this provision will work. I’m very concerned about this provision being there.

As for the other changes, I welcome the recognition of some aspects of the digital economy, notably with regard to drip pricing, the additions to the abuse of dominance provisions and the merger and civil collaboration provisions. But I am worried, again, that these are little tweaks that, at the end of the day, need to benefit from broad consultation on what the objectives of the act are and how we should achieve those, so that they may be overtaken by what we ultimately decide.

I will close by reiterating the importance of competition policy reform and that we need to do it well. This requires consultation from a plurality of stakeholders, and many more stakeholders than were consulted in Senator Wetston’s consultation. It needs to be a broad consultation of non-traditional stakeholders in the competition policy debate, and then we need to identify the values and principles we want to put forward in a competition policy and think about how they fit in a larger whole-of-government response to the new economy and the digital society.

I am delighted that I am here and looking forward to your questions. Thank you.

The Deputy Chair: Thank you very much for your comments. I do not think that you will get much disagreement in this committee in terms of the need for robust debate on this issue. We are here, and we are going to have a good debate in this committee right now.

Mr. Dachis, please proceed.

Benjamin Dachis, Associate Vice President, Public Affairs, C.D. Howe Institute: Thank you very much. I will also start by saying that I had the great pleasure of working with Senator Wetston on the C.D. Howe Institute’s Competition Policy Council, as he was a member of the group from the very beginning. I want to echo Senator Deacon’s remarks congratulating Senator Wetston for his enormous efforts to elevate the debate on this. It was an enormously valuable consultation effort that helped kickstart so much of what we are seeing, so thank you again, Senator Wetston. I wanted to say that, and I will say it as many times as I possibly can to congratulate your amazing work and time in the Senate.

For a little background on the council, it is comprised of some of top-ranked academics and practitioners in competition law and policy and provides analysis of emerging competition policy issues. It has operated for over ten years as one of Canada’s leading hubs of thinking on competition law.

In its latest communique, the council noted its support for the government’s intention articulated in Budget 2022 to consult broadly on the role and functioning of the Competition Act and its enforcement regime. We want to emphasize that any review of the act should include a wide range of views.

However, the council cautions that rushed amendments to the perceived shortcomings of the act without careful consideration and thoughtful debate could have unintended and severe consequences for the Canadian economy.

It is this question on the process that I suggest the Senate reflect on, as Professor Quaid so eloquently said, and I want to echo her remarks.

The council or individual members have supported at a high level much of the substance of the reforms in the bill. For example, the council has previously expressed support of an expansion of private rights of action for the act’s abuse of dominance provisions.

But there are many more details as part of allowing private access that will be critical to making sure that these provisions are a success. For example, what is the potential role of damages accompanying private rights of access? This is an area worthy of discussion before any amendments are proposed or finalized.

Let’s take another area of the proposed legislation on wage fixing. Current and past council members have pointed out that there are sound legal and economic reasons to permit a criminal enforcement approach for wage-fixing and no-poach agreements. The C.D. Howe Institute published that.

But the details will matter, and we can get into that in more detail in the Q&A.

In provisions to determine whether someone should go to jail for more than a decade in this area, we should probably be sure about the details. Indeed, there are questions about the constitutionality of the provisions that I can get into after my remarks.

We must see these changes along with other potential changes that the government suggests will come after this preliminary phase, but we do not have any details about what the secondary phase of consultation will look like.

In conclusion, good for the government to put forward potential reform ideas to the Competition Act, but to drive this forward with limited consultation via the budget bill is the wrong way to take this road as we may not end up in the final destination that we all want.

Thank you very much.

The Deputy Chair: Thank you, Mr. Dachis. I think we agree with your assessment of the need for broader consultation going forward.

Mr. Fay, we would love to hear from you, and then we’re going to open the floor to questions.

Bob Fay, Managing Director, Digital Economy Research, Centre for International Governance Innovation: Well, thank you, Senator Deacon and committee members, for the opportunity to present the views of the Centre for International Governance Innovation, or CIGI, on Bill C-19. My name is Bob Fay; I am Managing Director of Digital Economy Research at CIGI, and my work focuses on the governance of digital technologies.

My remarks here tonight draw upon a submission that I made to Senator Wetston’s competition consultation, and, like others, I would like to commend the senator for undertaking this important and timely consultation. I think I read the paper by Professor Iacobucci about ten times.

I offered detailed suggestions in that submission, but tonight I will offer high-level remarks framed around the broader issue of governance in the digital era, which does include competition policy.

Then, with respect to Division 15, my remarks most closely relate to improving the effectiveness of the merger notification requirements and other provisions.

I would like to make three points.

First, digitalization is transforming all markets and in ways that are challenging all policy frameworks. With the ongoing shift towards data and intangibles as drivers of economic growth, regulatory frameworks need to adapt. This new intangibles growth model is vastly different from our traditional tangibles-based economy. It exhibits increasing returns of scale and scope, asymmetric information and network externalities that are manifesting themselves in a winner-take-all environment. Digital technologies are transforming all sectors and creating new market structures that have not been witnessed before. Proposed changes to the definition of anti-competitive conduct are welcome, but these transformative changes necessitate a thorough review of the Competition Act.

Second, competition policy and other policy objectives overlap. Digital technologies and data have blurred the lines between competition policy and other policy objectives such as the protection of personal privacy. Regulations and processes need to be updated and domestic cooperation mechanisms embedded within them.

Canada can look to the United Kingdom and its Digital Regulation Cooperation Forum as an example to follow. This forum brings together broadcast, privacy and competition regulators to ensure greater cooperation for online regulatory matters.

An update to the regulatory frameworks is extremely important to maintain the trust in our public institutions to show that they are responsive to the changing nature of the economy.

Third, Canada can learn from other jurisdictions and, at the same time, needs to collaborate with them. As we have heard, most other jurisdictions are reviewing and updating their competition frameworks. Canada can learn from them, both from why they are reexamining their frameworks and how they plan to change them.

Further, actions taken in other jurisdictions have a direct bearing on Canada given the global nature of digital technologies, and there may be gains in coordinated actions and information sharing across jurisdictions.

Let me conclude: Issues created by digital technologies are complex, and in addition to consideration of the amendments taken in Bill C-19, a comprehensive reassessment of the Competition Act should be undertaken that brings in a range of stakeholders since competition policy touches everyone in society.

Thank you for your time, and I look forward to your questions.

The Deputy Chair: Thank you very much, Mr. Fay, clear and concise as always. I’m glad to have your comments.

[Translation]

Senator Bellemare: My question is for Ms. Jennifer Quaid. Given your concerns about these draft amendments, who else should be consulted? I would also like to have examples of abuse and negative consequences that these changes may bring in reality. Are you so fearful as to suggest that we wait before adopting these amendments to do a much more comprehensive study of the Competition Act?

Ms. Quaid: Thanks for your question. I will try to answer it quickly. The answer to your last question is yes, I think it would be better to wait and do a thorough study. I think that these are partial amendments that do not address all of the concerns raised in Senator Wetston’s consultation, which was nevertheless an interesting consultation. I would like to point out that many people with relevant expertise contributed to it.

However, it was competition insiders who participated in that consultation, and it circulated mostly by word of mouth between people who already knew each other in the business. I think we need to actively — and this will take an effort — seek out people who are not traditionally associated with competition. Whether it’s civil society organizations, workers’ organizations, legal organizations, representatives of marginalized populations, such as racialized populations or Indigenous communities. I think we really need to cast a wide net. It is not enough to limit the consultation to insiders, even though they are experienced experts in the field. I’m part of that group of insiders — I’m not saying I’m seasoned — who know the rules well and are very detail-oriented, yet know the big issues.

If I can give you examples, my main fear would be about the provision that will criminalize wage-fixing conspiracies. I have several problems with these provisions, but I would say that the people who should be consulted about this provision — who will not be able to appear before you — are the prosecutors who will be responsible for the implementation of this highly problematic provision, both in terms of ideas and in terms of technical issues. Ideally, I will leave it at that, unless you want details.

We are solving a problem that is ill-defined and proposing an ill-adapted solution that, given the characteristics of Canadian criminal law and especially Canadian corporate criminal law, will not work as promised. Promises are made that cannot be kept. They promise to protect employees and to remedy the inequality of bargaining power in employment and labour matters. We already have a highly developed system, precisely to achieve trade union peace and worker peace in order to remedy situations of unequal bargaining power. This is called labour law and employment law. For the most part, this is a provincial responsibility. By creating a criminal provision, this will be a federal jurisdiction. Criminal law is not about compensation, restitution, or problem solving.

While there is the possibility of using criminal law for remedial purposes, the history of enforcement of these provisions in business and competition — I could go on at length — shows no openness and no great interest in doing that. Those are my concerns.

Senator Bellemare: Thank you very much, Ms. Quaid.

[English]

The Deputy Chair: Thank you, Ms. Quaid. Mr. Fay, followed by Mr. Dachis, do you have anything to add or to challenge on that?

Mr. Fay: I defer to Professor Quaid on some of the technical aspects. But with respect to the need for consultation, I agree.

As many people have mentioned, competition policy touches everybody, even if they don’t know it. It really is important to have a large stakeholder group. That wasn’t the case for Senator Wetston’s report. That was a rather technical report. But I think these matters can be presented to people in a non-technical fashion. I think we are actually seeing that daily. I would encourage that process.

The Deputy Chair: Thank you, Mr. Fay. We certainly heard that last night as well from Competition Bureau Canada: diversity of opinions and understanding the values are crucial elements as mentioned by Professor Quaid. Mr. Dachis.

Mr. Dachis: Yes, I would say that the government skipped a couple of key steps from the consultation that the senator conducted right to legislation. There is a lot in between in terms of talking to potentially affected stakeholders — stakeholders who knew they would be affected but also others who are only going to find out when they start getting class-action lawsuits sent their way. There are a lot of implications across the overall economy in areas that we know and in areas that we don’t even have a clue about in the future.

This needs to be more widely talked about before this kind of legislation gets passed.

The Deputy Chair: Thank you very much, Mr. Dachis. Mr. Mignardi, I know at a certain point you would like to join in on that. If we can, we’ll save that for when a question on this is directed to you. There is no question that looking at new entrants as one of the groups that needs to be consulted, for example, is really crucial. So I will offer that you join in at a certain point whenever you feel that you have something different to offer.

Senator Loffreda: Thank you to all of our panellists for being here. Congratulations and thank you once again to Senator Wetston for his excellent work on the Competition Act.

My question is for Professor Quaid. It was mentioned that amendments were necessary to keep pace with other jurisdictions and that our international peers are way ahead of us. Based on what I have heard, maybe they still are way ahead of us. Do these amendments decrease that gap? And how much more is necessary? If we do have to focus on a few priorities, can you elaborate as to which ones those would be in the short term?

Ms. Quaid: Thank you, Senator Loffreda, for the question. It is a very relevant one.

I would say that our international peers have been tackling the larger question first. The larger question is how does the state — be it the Canadian government or the provinces together — respond to the transformation of society that has occurred largely because of digitization? You know, that is a kind of touch-all, really, for some pretty important structural changes to how we relate to one another and how business is done and also to just the accelerating pace of change. All jurisdictions are struggling with how to do this. But if there is a common theme, it’s that this is not something that can be solved by one particular regulatory approach or regime. It might be helpful — and I will be as brief as I can — to describe the two emerging big models or big players: the United States, on the one hand, and the European Union, on the other hand.

The United States has chosen — for reasons that relate to how it has tended to approach these matters and also because it does not have a lot of enabling legislation dealing with a lot of aspects that relate to the new economy — to situate most of the coordination of enforcement, thinking and policy development around digital transformation within the Federal Trade Commission, or FTC, and the Department of Justice, or DOJ. So that looks like competition policy except that it’s quite a bit broader. The FTC does have a mandate that is different from our Competition Bureau in certain levels because they do have a consumer mandate, and they have colonized privacy to some extent because there is an absence of a privacy framework at the federal level.

The Americans are pragmatic. They adapt the policy as a function of what is going on. They have the Biden Administration’s executive order. It is very much a whole-of-government approach, but they have a coordinating agency that is leading the charge there.

The Europeans have gone at it differently. They’ve said that there are all these aspects of the digital economy that we need to deal with. There is the Digital Markets Act, the Digital Services Act, the Artificial Intelligence Act and now the Data Act. They all started with the General Data Protection Regulation. The Europeans have gone at it by saying we need a legislative framework of rules, and then those things will trickle down into the competition law, which you have to understand in Europe also has the political function of maintaining the European market. So there are some things that are not comparable to Canada.

The point, in both cases, is that they’re trying to find ways to have a comprehensive approach. One is to do lots of legislation and lots of rules, framework; the other is to go for an enforcement coherence among agencies. Canada is behind on both things. We don’t have any real, important legislation yet. We have no legislation on AI. Our privacy legislation is out of date. The provinces are moving a little bit faster than the federal government on that. We have no real direction on data. They’ve created a data commissioner; we have no idea what that means. We don’t have the enforcement culture that the Americans have, where they kind of more nimbly adjust their antitrust agency.

I’m not sure that legislation is the full answer here. Of course, we need to think about changes to the act. I’m just not sure that little tweaks here and there, dropping in a reference to privacy or dropping in a reference to network effects, will make the difference because what you need is the capacity to analyze these questions. You also need the enforcement heft that goes behind that. More importantly, you need to decide how to tackle this collectively.

If I had one wish, it’s that there would be a coordination among relevant agencies. The low-hanging fruit is privacy, data protection, national security, telecommunications or media, CRTC, and the Competition Bureau. I might be forgetting something.

The Deputy Chair: There is a need for framework policy updates, without question, Professor Quaid, and you speak that language very clearly and concisely and directly.

Ms. Quaid: Thank you.

The Deputy Chair: Mr. Dachis, anything to follow up on that? Followed by Mr. Fay.

Mr. Dachis: I definitely agree with a lot of what Professor Quaid said. Again, this goes back to the fact that we may disagree on some elements of where we want to go, but on how we’re getting there, we’re very much aligned that this is the wrong way to go about putting reform together.

First, on the question of being behind the rest of the world, you may have different institutions and different policies on competition, but that often reflects a very fundamental difference. You can see how it’s difficult to just immediately import something. A good example is monetary penalties for abuse of dominance, which is that the proposed amendments do to bring in a European-style ability to levy enormous fines based on global revenue.

But how will that work in Canada? We have a different constitutional structure and, again, getting to the design of the requirements of process, based on whether fines are punitive or are meant to alleviate the direct harms. They are two very fundamentally different processes that the courts have to apply here in Canada. How does importing this European approach gel here? We haven’t even thought about these things. We’ve only been looking at the legislation for the last two weeks. We need to spend serious time asking questions about the fundamental constitutionality of, really, major proposed changes.

The Deputy Chair: Thank you very much. Mr. Fay?

Mr. Fay: Thank you, senator. Once again, I agree with Professor Quaid. I’ll just add a couple of things and reinforce a couple of points.

One, these other jurisdictions, particularly the EU but also the United Kingdom, have really taken a step back and taken a comprehensive approach to what must change in terms of our instruments, our regulations, our policies, in this digital economy. We haven’t done that yet in Canada, but it is essential.

Second, competition policy can’t do everything. There’s a host of regulatory tools that the EU, for example, is employing, which merits consideration in Canada. Some of these are like how we can get interoperability among these digital giants. How do we open up the data? They’re tied together. What are the appropriate tools to allow that, for example, standard setting? There is a very wide range of issues that really needs to be put on the table. Thank you.

The Deputy Chair: Thanks very much. Colleagues, I’ve chosen to let each of our witnesses respond to each question in the interest of keeping on specific subjects. I know we’re going a little longer with each senator’s questions than normal, but in this situation, it’s worth it, and I hope I have your support in that regard.

Senator Woo: Chair, this is a good approach. We’re getting some really valuable input from the witnesses. Thank you for that.

I’m struck by all of the witnesses, on the one hand, giving effusive praise to our colleague Senator Wetston, but on the other hand, essentially rejecting his recommendation that we do some targeted changes to the Competition Act.

I wonder is it because you come from a different starting point in terms of the digital economy and the changes in the economy that we are facing and you feel that this law of general application is no longer generally applicable and that something fundamental needs to happen?

In Senator Wetston’s commentary on the input he received, he comes out quite clearly saying that the status quo more or less works, and we need some targeted reviews, which is kind of what we’re getting in this bill. But then he paints or he characterizes two other approaches. Could you comment on whether you belong in those schools? One he describes as a neo-Brandeisian, or populist approach, and the other one he calls a balancing approach.

It sounds like you’re in the balancing school. But can you help us think this through from the perspective of your starting points? Because it’s hard to untangle this debate, particularly when we all are giving such high praise to Senator Wetston but not following his advice.

Mr. Dachis: I would say I’m in strong agreement with where Senator Wetston ended up with a lot of his commentary on the public consultation. You can draw a direct line between the things that came out in his consultation, which then made their way into the legislation and about which people aren’t necessarily disagreeing — things like clearing up parts of section 79, private access to the Competition Tribunal. Those are fine, but then we’re talking about process.

Process is different than the amendments here, where if this bill were put in place as part of a stand-alone piece of legislation or part of a broader consultation where we see how things fit together, I think there would be a lot less disagreement. When you put things into a budget bill, we all know that governments will strongly pressure both chambers to pass this by the end of June. That is the wrong way to get these kinds of deeply fundamental reforms of Canadian legislation through both Houses of Parliament.

Mr. Fay: Well, I don’t know if I’ve ever been called a populist, although I think that might be how I would be referred to here.

The report itself is excellent because it raised a lot of fundamental issues. It did cover the international landscape. The professor who wrote it tried to bring these lessons back to Canada from that professor’s perspective, and that’s fair. There is no problem with that at all because actually it helps other people shape their own arguments. I disagree with some of the elements. I do think there is a fundamental change in the drivers of growth and in the distribution of the gains that come from that growth. And it needs to be addressed for a lot of reasons that we can explore. But, as Mr. Dachis said, the process is critically important.

I don’t think the things that might be considered low-hanging fruit should be jammed into a budget bill — we have experts, like Professor Quaid, who can explain — because competition is so fundamental and so important. I think it’s understated that we do need that broad multi-stakeholder consultation. In fact, that’s how policy needs to be done in this digital world in which we live because competition is very hard to divorce from privacy or national security or public safety or international trade. All these policy issues are interwoven, and we need to think about them horizontally and not just vertically. Thank you.

The Deputy Chair: Thank you.

Professor Quaid, do you have some last-minute follow-up, and then we’ll move to the next senator. Thank you.

Ms. Quaid: I am probably the one on the outside here. I’ve been doing competition law for a long time, and I have always been on the side I’m on.

There are some long-standing issues with how competition law was framed and come up with. They trace back to a report that’s as old as I am. It’s the 1969 Interim report on competition policy by the Economic Council of Canada. Frankly, the world is different since that time, and I think some of the original suppositions and premises of that report don’t hold anymore, if they ever did. I think that competition policy was conceived in a certain way with certain underlying values, and the Supreme Court has referred to those underlying values before.

I believe we’re in a moment — and I think Mr. Fay has identified that — where we might need to reconsider those underlying values, because competition policy, quite honestly, has remained pretty narrow and hermetically sealed. It’s nice and neat and tidy, but I don’t think that that is the right kind of competition policy to have.

Although competition policy can’t do everything, it should be doing more, and I think — and I’m going to put it on the table, as controversial as it is — the pretense that competition policy is neutral must be abandoned. Competition policy is a choice about values. It is inherently political. It’s just a question of which values. That is why the consultation of stakeholders is so important. We need to come to a consensus as to what things are important, and then we can decide how best to achieve them.

Of course there will be disagreement. We will have to make compromises. We will not be able to do everything. But that’s, I think, the fundamental thing that is going on, Senator Woo, is that there are long-standing disagreements, and these are superimposed.

Senator Woo: Efficiencies debate.

Ms. Quaid: We can talk about efficiencies, if you like.

Senator Woo: Got it.

The Deputy Chair: Thank you, Professor Quaid.

Mr. Mignardi, at a certain point, I’m going to come to you with a very specific question to bring you in on this as well, but if we can, right now I’m going to keep moving, so we can take our colleagues through one time with where they want to ask their questions.

[Translation]

Senator Massicotte: My question is for Mr. Dachis and it has to do with the penalties and the amount of money that has to be paid if we are found to be in default, and you made a comment about that. As you know, a 3% rate was applied before and now the rate has increased. Why is it a 3% rate, and how were the amounts calculated? Is there a reasoning and a principle of fairness behind it?

[English]

Mr. Dachis: I don’t know exactly where the 3% comes from. Professor Quaid may have more. I defer to her expertise in terms of a connection to European standards.

This kind of approach, though, that looks at revenue as opposed to the revenues of the company, turnover as opposed to the harm that the action caused, is based on the European approach. It’s that difference that is really important here, where, when we talk about damage that is based on the actual quantifiable harm of an action, that’s the sort of thing that does fit into the kind of framework that we have. But when we start talking about things that are much broader, that are potentially in the billions of dollars and that are not directly linked to the harm, there are questions about whether this is going to be constitutional.

There have already been questions about the constitutionality of the existing level of about $10 million, so increasing this by orders of magnitude creates enormous risk of this kind of legislation passing muster in the courts in the future.

[Translation]

Ms. Quaid: I would add that I am no more informed in relation to the choice of the 3% rate. However, I will play the lawyer, if I may. When reading the provision, you have to be careful. Given the structure of the proposal as it stands, it is only when the amount is more than $10 million for a first offence or $15 million for a second offence — and three times the value of the profits obtained is not calculable — that the reference to the figures from the tax return comes into play. Only then; so it’s really as a last resort that you come to this modality of the 3% of aggregate revenue rate.

That’s a different question than whether global revenues should be used when it’s a sanction in Canada. It’s really a last resort that it comes down to that.

I would say that the reason for preferring to use a number like revenue is precisely the concern I have with the use of profit. If you look at the history of the calculations, you are discussing the profits and how the calculations are made. Taking a figure from the financial statements is much more reliable and less likely to be disputed, but some may disagree with me.

However, I would add that I do not fully agree with my colleague Mr. Dachis on the issue of the administrative monetary penalty and its constitutional vulnerability. I am not convinced of this. It is very clear, there has already been case law on this subject: financial penalties are not fines or criminal sanctions and are therefore acceptable. One may disagree with the principle, but I am not sure, as a matter of law, that this argument holds water.

Senator Massicotte: Even for $10 million, it certainly depends on who you’re talking about, because for our big Canadian companies, $10 million is nothing; it’s laughing at consumers or employees. Maybe that’s what they’re looking for. There should be a way to anchor the opinion, perhaps arbitrarily, but with a reasonable amount relative to the company itself.

Ms. Quaid: I completely agree with you, Senator Massicotte, that the problem is that we want a law of general application that applies to the very small business as well as to the very large business. This is a style of legislation that is used in Canada. I think that the idea of using penalties associated with the financial size of the company is very positive, but we are retaining the maximum figures that are there. There is nothing to say that the maximum should be imposed; however, I agree with you that it gives the impression of vulnerability, especially for small businesses, and that it is more appropriate to adjust it according to the size of the business.

Senator Massicotte: Thank you.

[English]

The Deputy Chair: Thank you, Professor Quaid.

If I could, I’m going to keep moving at this point and give you the chance to give the first answer next time around, Mr. Fay.

Senator Ringuette: Thank you, witnesses. You are provoking our thinking, and that’s what we like in this committee, to be provoked. I truly enjoy your comments and thank you for them.

My question would be for Ms. Quaid, because you particularly referred to Division 15. When we look at wage fixing, it’s no different than price fixing. It’s collusion.

I understand from your perspective the Canada Labour Code, but knowing the Canada Labour Code, I don’t see how it would fit in that context, because here we’re talking about collusion, collusion in regard to wage fixing and agreement not to poach another employer’s employees. In the current labour context, this is extremely important.

I would like for you argue with me or argue against my view that it should be in the Canada Labour Code. Please explain to me.

The Deputy Chair: Professor Quaid, if you could be as concise as possible, because we want to make sure we keep cycling through.

Ms. Quaid: Law professor flaws, I know. I’m happy to send you some things I’ve written as well.

The critical problem, in my view, is that this wage-fixing provision has been characterized as a way to respond to unfairness and unequal bargaining power and to protect workers. There is an economic argument in favour of treating agreements among buyers with regard to the price they’re willing to pay for things. Those are called buy-side cartels, but that is not really the harm that I’m hearing described by the politicians who are in favour of wage fixing. I think there’s a disconnect.

The economic rationale per se behind the anti-competitive effect of wage fixing, or no poaches, or buy side in general, is that it will lead you to a suboptimal use, in this case, of human capital. Because you don’t allow people to get what the market would normally provide to them in the form of salary or labour mobility, they will leave that market and use their skills elsewhere in a less economically beneficial way. You have a net loss for the economy. It fits in this whole welfare is worse off theory.

That is not the concern I’m hearing about politicians. If you’re expecting this wage fixing provision to deal with the unfairness and unequalness of bargaining power, it’s not that. It criminalizes. It doesn’t criminalize paying people low salaries, nor does it criminalize no poaches itself. It just says you can’t agree.

Senator Ringuette: It’s an agreement among employers. It’s not the same style of agreement that you see within the Canada Labour Code where it talks about agreements and the relationship between employer and employees.

I very much wish to have your paper on this issue. I would like to read it and probably get back to you on it.

The Deputy Chair: Thank you, Senator Ringuette. Professor Quaid, if you would send that to the clerk we would all be grateful. Mr. Fay, do you have anything to add to this?

Mr. Fay: Not to that point. I’m an economist. It’s not often economists agree with lawyers or legal scholars, but I agree with Professor Quaid on the economic analysis.

On the previous point, when we’re talking about fines, one of the issues around this intangibles economy is we don’t know the value of data. The data asset is really what’s driving the growth of these giants that I think we’re all referring to. That is an open area that we really need to understand better for a whole host of reasons, including competition policy and merger analysis.

The Deputy Chair: I’m really grateful for that point. I think that’s an important point. Thank you for circling back on that, Mr. Fay.

Mr. Dachis: I want to add on to Senator Ringuette’s question. There is a much more expansive definition of “employer agreements” in the way that this legislation is written than what is in place for cartels.

The way that this is written any employers — not just employers who are competitors — and any agreement between employers is, per se, illegal. That is an exceptionally broader definition of an agreement than we have been used to in any kind of cartel discussions.

The other issue here as well is what’s an employee? What’s an employer? If this is meant to apply to, say, platform workers who work for Uber or for DoorDash, does the Canada Labour Code have a clear definition of what an employer/employee relationship is nowadays? It varies by province now. How are we going to apply this in Canada?

This legislation is much more expansive and vaguer than what we have in place. When you add that in to 14 years of jail, companies will face a lot of risks when this gets passed and there are not a lot of clear definitions that they can rely on.

The Deputy Chair: Mr. Dachis, you just made the point about the interconnectability of all these pieces of legislation. That was stated by Professor Quaid earlier. The platform legislation in Canada has fallen too far behind.

Senator Yussuff: Thank you to the witnesses for your digression on what some of these provisions mean. I’m going to stick to the same point and try to understand a bit more in my own experience in collective bargaining and the reality.

So 90% of the workforce resides in provincial and territorial jurisdictions right now. Only 10% of the workforce falls under federal jurisdiction, but it’s a critical part of the workforce, namely, telecommunication, shipping, transport — I can go through the list with you.

Reading the section, I’m certain the drafters had something in mind. We don’t know what that is specifically, but basically it’s about employers that conspire, agree or arrange to fix wages or prevent the hiring of each other’s employee.

In a typical bargaining, what we call a master agreement, you sit down with one employer, you bargain a collective agreement and then all the other employers in that sector have to agree with the agreement. That’s the standard. It protects the workers to ensure they’re treated fairly, but equally it maintains that, as a union, you’re not going to take advantage of your workforce so all your people are going to leave the employer and go someplace else.

Given you’re a lawyer, and your comments, Professor Quaid, what would be your take on the shortcoming of what this means?

Ms. Quaid: It’s difficult to respond quickly, but you have hit on something that I didn’t mention but it’s one of many points. That is, the Competition Act traditionally has exempted anything to do with collective bargaining or industry-wide bargaining. That’s section 4 of the act. The zone that we are targeting is between the exemptions that are recognized in section 4 and then section 45(1.1) is unclear to me.

I have to echo Mr. Dachis’ point. It’s very important. “Employer” and “employee” are not defined in the act. Those definitions are going to come from provincial law by and large, I think. It’s going to be difficult to give that content.

The other thing that is hard about converting agreements about wages and employment conditions into a conspiracy provision is that people are not like goods and services. Human capital has traditionally been something we don’t deal with in competition policy, I think for good reasons. That’s why we have so much labour and employment law that supports how the relationship between employers and employees should work out. That’s why I am concerned that this provision is going to create a great zone of risk. It’s going to be hard to enforce if you look at it from the prosecution side, and I think people will be disappointed with what the outcomes might be.

I think a lot of the concerns behind wage fixing came from the hero pay agreement that occurred in 2020. That’s a very unusual circumstance. That is not very analogous to the cases that are happening in the U.S. They are not the type of industries or the same type of workers. Honestly, in the future, what will happen in a hero pay situation? It’s going to be messy. One person will pull their hero pay first, but they will do it that way. They’ll watch each other’s signals. I don’t see where this provision is going to make any difference, to be quite honest.

The Deputy Chair: The situation of conscious parallelism is real.

Senator Yussuff: I want to make one point in regard to still not knowing what the government’s intention is here. Is there a possibility that the government still intends to consult in regard to how these provisions will apply? I’m trying to gauge the broader public that might have an interest in that. It’s not unusual for the government to stick something in a budget bill and then try to gather more in-depth analysis of what they’re providing at a later time.

Mr. Dachis: The provisions wouldn’t take force for a year. In theory, the government has a year to consult. But that’s kind of playing a game of chicken. We’ve only got a year. If the government doesn’t come back with legislation — that is, if things happen and they don’t get a chance to make any changes — we’re stuck with this poorly thought-out provision. To rush this now is a pretty risky strategy as opposed to pushing this. My recommendation is to push these provisions from the Competition Act to a future piece of stand-alone legislation rather than to rush this through the house now.

Senator Yussuff: But it is possible.

Mr. Dachis: It is possible but, again, it’s a very high-risk strategy. What we’re talking about on the other end of these risks are potentially billion‑dollar fines and jail time for people who inadvertently get caught up in this.

Senator Marshall: Thank you to all the witnesses. What you are saying is very concerning. I just want to go back to the last speaker who was talking about, we have a year or the government has a year now to try to pull this together and fix it up. But government moves really slowly. I would not count on anything being done in phase 2.

I would like to know, look into the future and assuming that we have just got phase 2 and we have just got the amendments that we have in the Budget Implementation Act, and they go into force. What do you see is going to happen? I would be interested in hearing what you think is going to happen. Do you think that these legislative amendments will just sit on the books and will not have any real impact? Or do you think that there will be constitutional challenges and all kinds of court cases? Or do you think that we will just hobble along with the amendments?

I would like to have some idea as to — I know that this is not a good process, but this legislation is going to be passed next month, if not this month. Take us into the year when these amendments come into force. What can we expect to see so that we on the Banking Committee can look and say, oh, well, we knew that that was going to happen? Can you just go into the future a little bit and tell us what we can expect? Will it be something big or something not so big?

Mr. Dachis: In some areas potentially very big, but also hidden in the sense that — take the AMPS, for example. I think that Professor Quaid made a point that it is not likely that companies will face a 3% fine of their overall revenues. It is a backstop. But it is still a possibility. There is no clear bright line test between what is legal and not — especially now that we’re starting to monkey around with 79(4) of how privacy is now a factor here.

Companies have that fundamental risk of what the practice is, and they do not know whether their practice will be subject to abuse of dominance. Then they do not know ex ante — because there is no bright line test of what the tribunal or the courts saw fit as assessing damages.

So there are a series of risks — if things do not play out right and if you are a major international company — of an enormous fine in Canada. I would predict that the immediate effect for a lot of companies is a pulling back of their potential plans, potentially innovative pricing solutions in Canada.

But you wouldn’t see that. You wouldn’t see that in the legislation. That would be a hidden cost to the overall economy. I would predict that as the immediate effect of a lot of pulling back of major investments and decisions by businesses that could potentially benefit Canadian consumers. A lot of things that get labelled or could be perceived as anti-competitive, depending upon how you look at it, actually is pro-competitive. But, again, these are the kinds of things that ex-ante, when you are a business looking at things up front, and it could go either way, you are just not going to do it when that kind of enormous risk is at the other end.

Senator Marshall: Yes. So they will be risk-averse and hold back. That is interesting.

Could I have some comments from some of the other witnesses?

Mr. Fay: Yes. I generally agree with Mr. Dachis. I think one of the points that we’re trying to get across at our work at CIGI is, in fact, the interlinkages among all of these areas.

There is one bill that seemed to die and it is fundamentally important, and that is privacy legislation. I think firms out there are confronted with a number of different uncertainties. There are the ones that Mr. Dachis just mentioned. There are others that will help clarify how they can use their data resource.

I think my main concern is that there are a number of things that have to happen. They need to be comprehensive. That is difficult for governments. We understand that. Piecemeal changes probably just create an even more chaotic environment for firms where some of the rules are not very clear anyway.

The Deputy Chair: Great. Professor Quaid, any tight — as best you can.

Ms. Quaid: I am sensing a theme here, Senator Deacon. I’m sorry. My students would agree with you.

The Deputy Chair: No, this has been a great learning experience for us.

Ms. Quaid: It is really engaging to speak with you and such a pleasure to listen to your questions. They are really important.

To answer the question about the one year, I want to make one thing clear: It is only the criminal provision in paragraph 1.1 of section 45 that has a delayed entering into force. Everything else enters into force right away. But because under the criminal law we are concerned about the application in the future — that was done last time also with the Competition Act. What that means practically, though, is that only agreements that occur after one year of entering into force are actually going to be subject to this provision. So everything else is going to apply right away. This is coming, if you really think that this train has gone.

Senator Marshall: Yes. This is coming. This legislation is going to pass. There is not a chance that it will not pass. That is what I would like to know. What can we expect in the short term? I’m not looking at five years down the road although it might go on that long because government is very slow. We think that we will get phase 2. We’re not getting phase 2 next year, because government does not move like that.

Ms. Quaid: In answer to your question, senator, here is what my impression is: Section 45, paragraph 1.1 will not be applied at all because the prosecutors will recognize what a mess it is. They will not touch it with a 10-foot pole for fear, among other things, of constitutional challenges. We just got out of the mess of the previous 45 in 2009 when they finally fixed what was a completely dysfunctional provision. Now we’re injecting a new level of uncertainty.

I would also add that the new section 45 has never been applied in a contested proceeding and has never been interpreted. We are still very much in unknown territory there. I expect that will not be applied at all, much to the chagrin of people who expect it will be.

I think the changes to drip pricing might help the commissioner with some of the misleading advertising provisions. I do think that there is a question about choices between civil and criminal ways of going, because both are possible. I think the bureau has to come out with guidance for that and quickly.

On the abusive dominance things, they will have to come out with guidance quickly. I do not know how much it will change. I share the skepticism of Mr. Dachis and Mr. Fay that we are tinkering at the edges and creating uncertainty, and that is not usually good for business decisions.

I think where I would perhaps take a slightly different view than them, though, is that it is very unclear in the economic literature — the United States, Europe; they are all looking at it — about what does and does not encourage innovation. I think that it would be a mistake to say that legal frameworks and governance are anti-innovation. I think you have to be careful about assuming that the less intervention of the state in society, the more innovation you have. I would just caution you on that.

The Deputy Chair: I’m betting Mr. Fay has a response to that. I saw his hand go up. I would like to offer you a chance to jump in there, Mr. Fay.

Mr. Fay: Maybe my comments were misinterpreted, because I was not trying to say that, Professor Quaid. In fact, appropriate regulation is exactly what we need for our economy to function. I am not anti-regulation at all. I’m for appropriate regulation, and I do think the regulatory structures that we have right now need to be revamped. Thank you, senator.

Senator Smith: Thank you, witnesses. Bill C-19 broadens the powers of the Commissioner of Competition, among other things. The issues that continue to surface around the Competition Tribunal is that the speed of decision making is slow; inability to make timely decisions in a fast-changing economy reduces economic activity and hinders growth. You talked, witnesses, earlier about how we are doing internationally. I wonder if you could develop or continue in that vein. How does Canada fare internationally with our peers with respect to similar laws around competition? Are there jurisdictions with more streamlined decision making? More importantly, what can we learn from these people or these countries? If there are two or three takeaways from the international situation, what can we learn from that to help us make our situation better?

Mr. Dachis: The one thing that jumps out to me is the existence of a specialized competition tribunal here in Canada. If you look at the United States, competition cases are handled very expeditiously by just the regular courts, in the same way that they can handle complicated patent claims and other complicated commercial litigation. Our general courts will be able to handle competition cases as well.

This goes to the other point that I made about — even things that, substantively, a lot of people agree on, in terms of the need for private access to abuse of dominance. That will potentially take an already slow competition tribunal system that is really limiting. Again, I look to the point on having diverse voices in jurisprudence. The whole point of great lawmaking is letting different views battle one another. When we’re handling everything through the Competition Tribunal, it doesn’t create a diverse jurisprudence.

If we were to bring more abuse of dominance cases to overall courts with different perspectives, we would have a faster and more diverse process that will get us better law in the end. The C.D. Howe Institute has published a short memo on this exact point, which I can send to the clerk after this meeting. This goes to the importance of thinking about the amendments here in the broader context of the other things that we need.

The Deputy Chair: Thank you, Mr. Dachis.

Ms. Quaid: I agree with Mr. Dachis that private access is not a panacea. Not all cases will lend themselves to private access, so you still need a role for the commissioner. I worry about the sort of implied suggestion that this will solve everything. I do think that the tribunal is a piece of the puzzle that people are not talking about.

The tribunal is hampered by its structure and by its statute that combines expertise with a right of appeal. That makes it essentially a very vulnerable tribunal under our current administrative law because the rules govern when decisions can be subjected to review. That means the decisions of the tribunal are not afforded a lot of deference, even though they are very specialized, and so you do not get a lot of the benefits of a specialized tribunal at all.

There is an example of a tribunal in competition that works well. That is the Australian Competition and Consumer Commission, the ACCC. I think there might be room for both a specialized tribunal and greater access to go to the regular courts.

What we see, for example, in cases of misleading advertising and, obviously, criminal cases, they all go to the regular courts. That is sending a message about the structure of the tribunal. It is not taking anything away from the people who work at the tribunal; it is just that the way it is designed is very cumbersome. We cannot afford to have decisions take this long.

The Deputy Chair: Thank you.

Mr. Fay, do you have anything to offer as a final thought?

Mr. Fay: Yes, it is not on the tribunal; that is not my area of expertise. I want to go back to one of the points that the senator was raising. As many of us have said, other jurisdictions are well advanced in this process of rethinking competition and competition policy. We can learn from them. We have examples in Canada where, for example, on the news bargaining code, Canada has looked to Australia and tried to put a Canadian stamp on it.

Regarding online harms, we went through a process that was not satisfactory. Now, the government’s embarking on a new process, which is much more consultative, but they seem to be moving towards a duty of care approach, which is what the U.K. has done. We can learn from other jurisdictions to help us speed up our own process, as long as we continue to do the consultation to make sure whatever approach is adopted is suitable for Canadians.

The Deputy Chair: Thank you very much, Mr. Fay.

I will ask a question now of Mr. Mignardi. I certainly offer you the opportunity to dive in on Division 10, but I think there is a great opportunity to bring you into this conversation, knowing that you also work with Equitable Bank and Equitable Trust, a challenger bank. You have a view of these issues from the perspective of a new entrant into a market that is dominated by some large incumbents. What are your reflections on the conversation so far?

It is an important perspective, certainly from my standpoint. I really think it would be a loss if we didn’t get to benefit from that in this conversation. Mr. Mignardi?

Mr. Mignardi: Absolutely. Thank you, Senator Deacon, for that opportunity. We’ve heard from other witnesses here today. I would fully echo the need to modernize the act. Other jurisdictions are ahead of us, and there is a lot for us to learn from them.

The diversity of voices and perspectives is important. Innovation is important. New entrants, as a pro-competitive force, are important as well. My focus is vis-à-vis the financial services sector and our expertise. For a new entrant into the financial services sector, these are tough roads to plow. We do not need to belabour the point that financial institutions are highly regulated and rightfully so, but from a practicable perspective, getting to maturity in that highly regulated sphere can be quite difficult for new entrants or even for existing incumbents. There are a number of hurdles. Competition policy can’t solve them all, nor should it.

No one particular regulatory approach is appropriate, as discussed by Professor Quaid. We look at this beyond the pure technical amendments and or policies. We see other means for potentially fostering competition, notably in the financial services sector, and we have a number of ideas, ranging from high-level to a bit more nuanced. I’m happy to go through those in four minutes or less, being cognizant of time here, if I may.

First, for any financial institution, their lifeblood is deposits. The chief focus is on raising money. Of course, there is a lot of competition out there in the financial services sphere for raising money. We think one mechanism that could really help smooth out the playing field is increasing CDIC limits, for example, for both individuals and small businesses.

One way to foster competition is to have increased limits, which would have a larger relative net benefit for new entrants than for the larger institutions, because you could take the view — and we certainly do — that the larger, established institutions, particularly those with the D-SIB or TLAC designations, effectively have their balance sheets guaranteed. That gives them an advantage over smaller institutions as it relates to raising deposits.

If you could have a situation where smaller institutions are able to have or benefit from higher guarantees from CDIC, you could encourage raising deposits there.

Similarly, we would point to the fact that smaller businesses have higher cash flows versus individuals, and they could certainly benefit from higher limits. That may, overall, improve the stability of deposits and resiliency in the sector. That is something that we think of as being pro-competitive.

I would also just make this quick point. Certainly, I’m not a tax expert, but those who study it carefully at our institution have told me that their analysis shows that larger institutions in the financial sector pay lower average tax rates than medium to smaller institutions. They are making more money but apparently paying less tax. The net implication there is that large institutions have a lower cost of capital. That is a big advantage to the larger players, right? It is a disproportionate impact on smaller institutions.

The last item I would raise — being conscious of time — is something as simple as raising covered bond limits. Covered bonds can be a great source of raising money for our institutions. Here in Canada, currently, there is a limit of 5.5% of our total assets. In our minds, certainly, that is much too low. We’ve seen other countries — Australia, New Zealand, Greece, Italy, Germany, Norway — all have higher and, in some cases, much higher limits than we have here in Canada. Again, it is a bit more technical as it relates to funding costs, but allowing smaller institutions to have higher limits provides greater ability to access this funding.

There are all sorts of good reasons here. It decreases the overall risk profile by enabling funding diversification and lessens dependence on D-SIB designation for funding access.

In conclusion, competition policy can’t be seen as doing everything, nor should it try to be. There are certainly other methods and things that we should be considering at least as it relates to the financial services spectrum.

The Deputy Chair: Thank you very much. I think you made the point well that competition policy extends well beyond the Competition Act. For Canada, becoming a more pro-competitive economy extends into just about every piece of legislation across our entire economy. That is certainly a lot of work for us to do. I thank you for that.

[Translation]

Senator Gignac: When I asked the question about whether the provinces had been consulted at a previous meeting, it was not clear that the government had done any consultation. That said, I would like to understand — let’s take some cases: labour scarcity is going to become an increasingly important issue for Canadian companies. I would like to take the example of temporary foreign workers. If farmers get together to agree on the working conditions that will be offered to attract temporary foreign workers, especially when these are seasonal jobs — during the summer, we have examples in Quebec — since there are fees, accommodation costs and many consequences when seasonal temporary foreign workers are needed, in particular, could they be prosecuted under the proposed changes?

Ms. Quaid: There is certainly a risk. What I do not understand, senator, is the discrepancy between the recognition of certain forms of agreements between employers in a certain industry or sector that are determined in section 4 and the prohibition in section 45 proposed in subsection 1.1. What is the interaction between these two provisions?

I agree with you, on the face of it, that this may seem problematic. It has to be said that this is one of the difficulties with the provision as it is drafted; it is very general. I think this highlights the fundamental problem, and I will repeat myself one last time: what is the problem that we want to tackle? Is it really that employers can agree between themselves on working conditions or is there something else behind it? If it’s really just agreeing on working conditions, I think we have a problem. The specific case you describe should not be targeted, or at least should be susceptible to defence or justification.

Senator Gignac: Thank you. It’s not just the temporary employees; I’m noticing that there are more and more corporate missions that are coming together in different sectors to go to Europe or even to attract foreign workers to Canada. In some cases it’s for temporary seasonal jobs, but in other cases it’s for permanent jobs. However, in small companies — think of the forestry sector or the mining sector — it is too expensive to take steps and go to France, for example. I can think of many examples of companies that even go to France twice a year to attract workers.

If these companies group together and offer similar employment conditions, because they work in the same sector, this could lead to prosecution, eventually. If we then have a labour problem or a labour shortage and we have difficulty attracting workers — or companies get together to attract foreign workers — this can affect the growth of the Canadian economy. So, to my knowledge, when I asked the question, it was not clear that the provinces had been consulted.

Ms. Quaid: I cannot speak for the government, but it seems not. I am surprised, frankly, senator, that the provinces are not responding. The circumstances you described are exactly the kind of thing that should be developed within labour law or employment law. I would add a nuance to my analysis, and that is why it is problematic, as Mr. Dachis pointed out: it is possible that the arrangement between these employers is to go and get labour, when there is a scarcity, and that this constitutes an agreement between them and that, in the alternative, working conditions are fixed or agreed upon. We recognize a possibility of defence, of collateral agreement, so the conspiracy, if you like, is part of a wider agreement that is justified, so it would be possible. The problem, as you immediately recognize, is that there is uncertainty. That’s the difficulty; companies will refrain from making this kind of arrangement which could be beneficial. But I would add that I seriously doubt that the prosecution service would prosecute in this case, because it is ambiguous.

Senator Gignac: Thank you. My concern is mostly for remote areas, as in the cities there is less at stake. Attracting labour to remote regions, outside the major centres — and I think this will be the case everywhere in Canada, but particularly in Quebec, because of unemployment rates that are lower than the Canadian average — is becoming an issue. It must be said that population growth is much slower in Quebec. I’m going to try to get some answers as to whether the provinces were consulted on this. I think we’re going pretty fast. Thank you.

[English]

The Deputy Chair: Thank you, Senator Gignac. You have done a tremendous job of reinforcing the importance of diverse voices in the consultation process in an important way.

Mr. Dachis, do you have something to add?

Mr. Dachis: Section 45 isn’t the only game in town in terms of the ability to prohibit the very anti-competitive agreements. There’s section 90 as well.

The government had a choice. They could have gone through the criminal prosecution approach to deal with wage fixing, or they could have gone with section 90. They could have consulted on the two. Section 90, for example, would have given a little bit more leeway for the group that you are talking about, saying this is a pro-competitive thing that we would not be able to hire these people without this kind of agreement, whereas going under section 45 just makes it illegal automatically.

Consulting and talking about the pros and cons of these approaches would have been a helpful approach.

The Deputy Chair: Thank you very much. We will go to second round now.

Senator Woo: Mr. Dachis, Professor Quaid and Mr. Fay, what is the difference between the competition policy and the Competition Act? What do you see as the purpose of competition policy? How much of competition policy should be carried by the Competition Act?

Mr. Dachis: Now I will be really constrained by the five minutes.

Senator Woo: But this gets at some of the key differences of opinion that I feel we have been dancing around.

Mr. Dachis: My answer is that we cannot have that debate right now when we’re dealing with these kinds of amendments. We have maybe a couple of weeks until this legislation passes. Now is not time to be having that discussion. You have that discussion first, and then you have legislative amendments that come, not other way around. That is the fundamental problem that we’re dealing with today.

Mr. Fay: I fully agree with what Mr. Dachis said.

I am not a legal scholar; I’m an economist. To me, competition policy is very broad. I think the act is the interpretation of a particular view of values, as Professor Quaid said. But competition policy — I think Senator Deacon also mentioned this — is not just the act; it is a whole bunch of other things that help to enforce competition in the economy. We heard it from Michael Mignardi as well.

There are all of these other things out there that need to be examined. You need that comprehensive approach so that you don’t get these unintended consequences.

I do not know if I answered your question, but it is very broad.

The Deputy Chair: We did hear a similar answer last night, Senator Woo, from the witness from the Competition Bureau in terms of pro-competitive policies.

Ms. Quaid: I will come out boldly and declare my colours. The others are being careful. This is not, obviously, the right time to be having this conversation; it should have been had before. We’ve all said that. However, my view is that competition policy now, in this economy, in this society, must engage with the other values that are important to us. If I were going to identify an organizing value, I would say that we need to think about competition policy as contributing to overall human thriving in Canadian society. That means more than just aggregate economic welfare, which has tended to be the base metric that we use for competition policy as imagined in the act, which is really just the legal operationalization of it.

There are some fundamental things about competition policy, some unstated assumptions, that need to be revisited, hence the importance of consultation with all stakeholders.

Senator Woo: Thank you for your clarity and honesty. I wish the economists would respond. Are they willing to?

Mr. Dachis: Sure. I disagree with Professor Quaid about what the purpose of competition is. That’s fine, but we should be able to have that conversation. These are deep debates, and it takes a long time to understand the implications and to have Parliament debate and understand that before they pass other adjacent legislation.

Mr. Fay: Can I jump in too?

Fundamentally, and it follows Professor Quaid’s point, what we are seeing is a deterioration of trust in our institutions. We’ve seen that in attacks on various institutions that are taking place. Maybe, some of that is undeserved, but I think people don’t necessarily understand the role of our institutions and whether — I tried to make this point in my opening remarks — our institutions are delivering what people expect from them.

This is part of that consultation process where people get to understand what the Competition Bureau is actually supposed to be doing versus other regulatory bodies, recognize that there are interlinkages among them and set up the structures to allow that to happen. I’m quite worried about the trust element.

Senator Woo: Thank you for indulging me.

Senator Loffreda: We’ve heard strong voices all night telling us that we are not as advanced with respect to the Competition Act as our peers, our international peers, and that these amendments won’t get us there.

I would like to know, if we have this information, is there higher crime or more offences in Canada? How do we compare with our international counterparts and peers? Has this led to a greater degree of crime in Canada, and how pressing is the need at this point in time to get there? Is it now worse than it has been historically when we talk about wage fixing, incomplete price disclosure, abuse of dominance? Are we seeing more of that? It would be interesting to have a per capita statistic on how we compare to our peers, given the fact that we are not up to par with the Competition Act.

Ms. Quaid: I’ll go first, but I’ll be fast. You have to make a distinction between what other jurisdictions are doing concretely in developing policy and instruments and actual enforcement. Canada is behind on developing instruments and new tailored policy that reflects the digital economy, but historically, Canada has always had less enforcement. That’s a function of agency funding and capacity. It’s a function of the way our rules work. Not only competition rules but also, as I said, criminal law rules or civil procedure rules also play into how effective enforcement can be.

I would say wage fixing is pretty exotic. The U.S. has it. I don’t think any other jurisdiction has it. We’re not behind on that. Many jurisdictions have no criminal competition law. There is agreement that cartels are bad but the Organisation for Economic Co-operation and Development, or OECD, has been very clear that you do not need to criminalize them, you just need to take them seriously.

Canada has weak abuse of dominance enforcement. Regarding merger enforcement, we have not opened this Pandora’s box. I’ll slightly open it. Our merger review process is different, because we have a full-blown efficiencies defence that can basically be used as a trump card in the context of a merger review, and no other jurisdiction has something comparable. We have low enforcement for structural and financial reasons, but we also have a legislative framework that makes it hard to bring these cases forward even when they are appropriate.

Mr. Fay: I’m going to answer the senator’s question in a completely different way. To me, the cost is actually the incredibly poor productivity record in this country. It’s terrible, and it’s been terrible for a long time.

I’m not going to blame it all on competition policy, but I do think competition policy or lack of competition is certainly one reason behind it. That is essentially a permanent loss to every single person in this country, and in fact, it affects disadvantaged groups even more.

Senator Loffreda: We all need a solution for production and productivity, so that’s a good point, a strong point, and one I like to hear.

Mr. Dachis: I’ll answer in a completely different way as well. I agree with a lot of what was said. Another element we have here in Canada is what is called a regulated conduct doctrine where the provinces are able to shield anti-competitive behaviour by professions, like by the dairy industry, or by a lot of other sectors that are on their face anti-competitive. The sector is protected from the Competition Act, because of the way that our courts and legislation have shielded them from enforcement.

These questions about differences in enforcement, differences in other agency powers, agency budgets, institutional structure, all affect how one defines whether we are behind or ahead in terms of our ability to detect crime or abuse of dominance.

The Deputy Chair: Thank you very much to our witnesses. I’d like to add that the depth and breadth of our regulatory moats around certain sectors make it hard for entrants to break into a sector, because the cost of managing that administrative burden to begin with is hard, but when you put it in the context of what we heard from Mr. Mignardi earlier, you’re trying to build a business as well. That was a really important question, Senator Loffreda.

Thank you to our witnesses.

[Translation]

Senator Bellemare: I think this is a very interesting discussion and probably deserves to be looked at in much more depth, because the visions clash, especially in the last exchanges about productivity and competition.

I agree with Ms. Quaid, who may have formulas other than competition to stimulate our economic growth, but we won’t get into that.

My question is not necessarily a question. However, since Senator Wetston is here and has given a lot of thought to these issues, would it be appropriate to get his reaction to the discussion we have had? If it is appropriate, I would like to hear it. Thank you very much.

[English]

The Deputy Chair: He made the point to me earlier, and I didn’t disclose it publicly. I apologize, Senator Bellemare. He wanted to be here just as a set of ears, and I respect that entirely.

Senator Wetston: I’m prepared to make a comment or two.

The Deputy Chair: Wonderful.

Senator Wetston: If I might just say, first of all, I’m indebted to all of you participating with respect to your consideration of the amendments that the government has proposed.

I would also like to say that if you had an opportunity to read the submissions to my consultation with Professor Quaid and Mr. Fay, as well as the enormous commitments of the C.D. Howe Institute with respect to this important area of economic policy, I had to purposely limit the extent of the consultation, because as you all know, it would be impossible for a senator to be able to engage in the kind of consultation that we expect the government to undertake.

Rather than commenting specifically on what I’ve heard today, I would like you to know that the commentary that you have was divided carefully into two main buckets. In the first bucket, if I could put it that way, the government did address a number of those amendments but went further than what I had proposed in those areas.

The second part of it proposed areas of considerable controversy and discussion, and I indicated it was necessary to have a very broad consultation with respect to those areas. A number of those areas have been commented on by the witnesses here today, and I’m grateful to have been able to sit in and listen. I decided I did not want to participate by asking a question or two.

I would like you to understand that — and I appreciate your request for me to make a few comments, Senator Bellemare — I purposely avoided getting into broader issues of procedure, process and tribunal issues, because I felt it would be too much to undertake in the consultation that I had attempted to undertake last September and October. There are major issues that need to be considered. The witnesses did a brilliant job of indicating many of them. These kinds of discussions are absolutely necessary, because we do not pay enough attention to competition policy as economic policy. That is so important to be able to support a market economy that would allow for less disparity within society, that will encourage competitive behaviour and that will create opportunities for more growth and productivity as you have identified.

But stepping back and looking at what other jurisdictions have done, there is no question about it; we are behind, and we need to get ahead of this, which is one of the reasons why Part 2 of the commentary really focuses on very controversial areas that require more consultation, including the impact of the digital economy, recognizing that in Canada we do have a corporate concentration problem. We do have an oligopoly problem. We do have areas of competition policy that have not been able to be permitted as an economic policy to advance our economy. Some of them have just been mentioned: marketing boards, interprovincial barriers to trade, et cetera.

I think, on balance, listening to the witnesses and hearing what they are saying about this has only encouraged me to believe that if the federal government does not engage on this Part 2 consultation, then I would encourage the Banking Committee to take this on and move forward with a broader consultation with respect to competition law reform, because it is absolutely essential, and the timing is right to do that.

Thank you for asking me for some comments.

The Deputy Chair: Senator Wetston, thank you very much. All of us who know you and cherish your perspectives and are grateful for the fact that you launched a debate that is desperately needed are grateful for the fact that you offered those comments right now.

Senator Wetston: Thank you.

The Deputy Chair: Thank you very much, Senator Wetston. You are going to be deeply missed.

If there are any other final comments, please let me know.

Senator Yussuff: We’re talking about an institution, for the most part, that in Canadian society rarely gets recognized for what it does. When it does get into the news, it’s quite removed from people’s daily lives in the context of how they experience price fluctuations and the challenges that are faced within their daily lives.

The Competition Bureau is in the news. They’re not going to allow a merger to happen, of course, in the telecom sector, and it makes national news, to a large extent. But what does that mean for ordinary Canadians in the broader context, which never gets debated, and that the people could understand both this role and responsibility?

From a consumer’s perspective, given that we’re having a discussion about the shortcomings that the witnesses have identified, how can Canadians better appreciate the role of the Competition Bureau in regard to their daily lives, recognizing they buy and purchase things, and they’re all dealing with the marketplace. This is a public institution that they need to have much more affinity with in regard to what it does on their behalf on a day-to-day basis.

The Deputy Chair: Who would like to start on that?

Ms. Quaid: I can try. I think that’s a difficult question, Senator Yussuff, because the Competition Bureau does make quite a lot of effort to communicate what it is doing through press releases and through speeches and this kind of thing. In some ways, there is so much noise on the internet and the various ways we communicate with one another that it’s hard to compete.

I don’t know whether the fault is so much that they are not trying to make their work known as maybe it’s not the most exciting thing for people, and it takes something like a telecom merger — which people feel strongly about because prices are higher than in other jurisdictions — for people to pay attention to that.

I think the other part of it — and I’m just going to venture a small comment here — is that the Competition Act does have among its objectives consumer choices and competitive prices, and the misleading advertising provisions are obviously directed, in part, at protecting consumers; although, it’s also to ensure a fair marketplace among businesses. But the primary objective of competition policy is not just consumer protection, and that is another area that is taken by the provinces where there’s cooperation. Maybe the larger conversation is to understand what the benefits are of a competitive marketplace to consumers as a broader sense, not just in relation to when they buy things or this kind of thing, but what the larger, maybe harder-to-see benefits are, like some of the things that Mr. Dachis mentioned about the impacts on business innovation, the impacts on Canada’s place in the world and productivity. Maybe it’s more about understanding that they should care about more than the things that are more directly tangible. And that is, I guess, communication.

I don’t know that I have another suggestion.

The Deputy Chair: Mr. Dachis or Mr. Fay?

Mr. Dachis: I would say what we need is more people speaking about competition policy with the kind of passion that we’ve seen, not just from the witnesses but from the senatorial equivalent of a mic drop by Senator Wetston. If more people heard that kind of passion and realized how important it is, they would come around and realize that this is arguably some of the most important policy in Canada.

Again, an enormous debt is owed to Senator Wetston. We’re here, I’d say, because of Senator Wetston’s efforts.

The Deputy Chair: Absolutely.

Mr. Dachis: That kind of work, bringing this up, and now it is in front of the parliamentary committee or the House committee is talking about this as well. This is now getting out there. More conversations like this, more consultation will bring this to attention. We’ve just got to keep this up.

Thanks, Senator Wetston.

The Deputy Chair: Mr. Fay, I think you’re going to be getting a last word.

Mr. Fay: That almost never happens.

The Deputy Chair: Use it well.

Mr. Fay: Actually, like others, Senator Wetston’s report really spurred me to — it’s been on my work agenda for a couple of years now, and then the report came out, and I said, “This is great; I need to do something.”

This will sound a little bit self-serving, but the Centre for International Governance Innovation is going to start a series of public events on competition policy. May 26, 2022, will be our first one, and we’re grateful that the commissioner has agreed to be the leadoff speaker on that. It really is why is competition policy important? It’s to try and attract a much broader audience to the importance of this issue and how it affects their daily lives.

It’s tough to make change, because competition policy is attacking vested interests, and they fight pretty hard. We need to make sure that people understand the role of it in their daily lives and up through the chain.

We’re starting a series of workshops. The first one will be on that. The second will be on what’s going on around the world, and what the lessons are that we can draw from Canada. Then the third will be a bit more concise on things that Canada can learn. We’re trying to do our part, like other organizations are.

Senator Yussuff: Obviously, we didn’t get into this; it’s a bit more complex. There is this whole aspect of Canada’s development and regional development in regard to competition policy. Of course, it’s a huge challenge, given the provincial jurisdiction. The reality on the other side of this is jobs and job losses that sometimes is very guarded by provincial governments in regard to how a particular competition policy might affect their region and, more importantly, how it might affect the jobs in that region.

I know we’re not going to get into that tonight, but I know it has been a large part of when there have been debates about certain aspects of mergers and, should that go ahead, what would be the impact on regional job losses and on regional development.

As we know, this country is a confederation with a loose understanding about the greater good of the country and we all guard against our jurisdictional needs. This is a huge challenge in the debate in this country. We need to understand how we position this question because it’s sometimes not seen here in Ottawa. But it’s seen clearly if you live in a region where I know what my self-interest is and I want you to protect it, thank you very much. Thank you so much.

The Deputy Chair: Thank you to our witnesses, and thank you, colleagues. This has been a really important conversation.

I want to go back to the title of the budget: A Plan to Grow Our Economy and Make Life More Affordable. The discussion tonight is all about benefits to consumers, especially marginalized consumers. It’s all about driving innovation into our economy from new entrants — and we’ve heard from one tonight, which was really important — pushing incumbents to invest more heavily in innovation and to bringing fairness into markets. The theme of the budget is at the core of the title, but there is so much more work to do. The concerns that were raised in the meeting tonight are really important.

I want to thank all my colleagues, the interpreters, who have worked hard to keep on top of things, the staff in the room, and our clerk Ms. Waltos. I want to thank our analysts, who are going to help us to pull together a cohesive observation. Thanks to everyone. We’ve come to the end of our time.

Ms. Waltos, we were able to land this plane just in time before the lights turned out. Thank you for your help in managing witnesses.

(The committee adjourned.)