Canada’s Competition Commissioner Provides Guidance on Innovation, Efficiencies and Competitor Collaborations
October 12, 2016
The Commissioner of Competition (Commissioner) addressed innovation, enforcement and policy initiatives at the Competition Bureau (Bureau) in his keynote speech, “Strengthening Competition: Innovation, Collaboration and Transparency”, on October 6, 2016, at the Canadian Bar Association, Competition Law Section’s Annual Competition Law Fall Conference. Speakers from Blakes at the conference included Brian Facey, Navin Joneja, Julie Soloway and Robert Kwinter.
The speech is the fourth in a series of speeches the Commissioner delivered this year addressing the importance of innovation. His focus on innovation reflects the Federal Government’s current innovation agenda.
The Commissioner emphasizes that innovation is a key element of a sustainable economy and that businesses in competitive markets should strive to pursue more efficient production techniques and develop innovative products and services to attract and retain customers. The Commissioner recognizes that disruptive technologies can allow new competitors to succeed, provided regulatory conditions do not impede growth.
- Efficiencies defence for mergers: The Bureau recently approved a merger on efficiencies grounds (Blakes represented Superior Plus Corp. in connection with its C$324.1-million acquisition of Canexus Corporation) and the Commissioner has confirmed that the Bureau will assess efficiencies claims presented by merging parties. The Bureau has recognized the importance of dynamic efficiencies and innovation and referenced these as a motivating factor behind recent litigation before the Competition Tribunal in the Toronto Real Estate Board case (see our May 2016 Blakes Bulletin: Competition Tribunal Finds Toronto Real Estate Board Engaged in Abuse of Dominance).
Firms relying on efficiencies in the context of a merger review should demonstrate clear, and in the Commissioner’s view, “significant” efficiencies from their merger and should do so as early as possible in the review process. The reference to “significant efficiencies” is at odds with the Supreme Court of Canada’s recent direction that even moderate efficiencies can overcome an anticompetitive merger.
- Competitor collaborations facilitate innovation: The Commissioner reiterates that competitor collaborations are important to drive innovation and emphasizes the Bureau’s willingness to work with firms to ensure that competition law does not unduly limit innovative collaborations. Indeed, the Bureau’s recently amended Intellectual Property Enforcement Guidelines (IPEGs) recognize that arrangements among technology firms, including forming patent pools, can lead to significant efficiencies by integrating complementary technologies, reducing transaction costs and clearing blocking patents.
- Protecting intellectual property rights: The Commissioner has emphasized that innovation can also be spurred through the protection of IP rights. Accordingly, the Bureau has committed to reviewing the IPEGs annually to provide certainty to innovators.
- Regulating the regulators: The Commissioner encourages other provincial and federal government agencies with rule-making powers to adopt the four internationally accepted best practices to promote competition and innovation:
- Regulate only when really necessary
- Use the best available evidence to inform decisions
- Strike the right balance between policy objective and minimal intrusion
- Review regulations regularly
The Bureau has recently advocated for changes to regulatory schemes that impede innovation, including in respect of municipal taxi regulations and advertising in regulated health industries. The Bureau is also undertaking a market study into FinTech to understand and support technology-led innovations in the financial services industry.
ONGOING ENFORCEMENT AND POLICY INITIATIVES
- Bid-rigging detection and prevention initiatives: The Bureau is committed to safeguarding government spending by delivering 30 anti-bid-rigging presentations to public procurement officials and industry participants this year, launching a hotline for tipsters to report fraud, corruption and bid-rigging in federal government contracts in conjunction with the RCMP and Public Services and Procurement Canada and working with Procurement Canada to develop data screening mechanisms to analyze bid submissions for signs of agreements between competitors.
- Continuing public consultation in the FinTech market study: The Commissioner reported on the Bureau’s ongoing consultations in the FinTech market study, noting more than 50 industry stakeholders, including more than 20 FinTech start-ups, have been interviewed. After a one-day workshop with industry stakeholders and federal and provincial regulators to identify industry or regulatory approaches that could enhance the efficiency and effectiveness of Canada’s financial services sector in early 2017, the Bureau will release a report for public comment. For more information on the FinTech market study, see our May 2016 Blakes Bulletin: Competition Bureau Launches FinTech Market Study.
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