Bill C-20: An Act to Amend the Competition Act and to Make Consequential and Related Amendments to Other Acts (LS309E)

Prepared by:
David Johansen
Law and Government Division
27 November 1997
Revised 9 March 1999

HOUSE OF COMMONS		SENATE
Bill Stage	Date	Bill Stage	Date
First Reading:	20 November 1997	First Reading:	24 September 1998
Second Reading:	17 March 1998	Second Reading:	17 November 1998
Committee Report:	27 May 1998	Committee Report:	3 December 1998
Report Stage:	22 September 1998	Report Stage:
Third Reading:	23 September 1998	Third Reading:	10 December 1998

BILL C-20: AN ACT TO AMEND THE COMPETITION ACT
AND TO MAKE CONSEQUENTIAL AND RELATED
AMENDMENTS TO OTHER ACTS

On 20 November 1997, Bill C-20, An Act to amend the Competition Act and to make consequential and related amendments to other Acts, was introduced in the House of Commons by the Minister of Industry, the Hon. John Manley.

In the summer of 1994, Mr. Manley asked the Director of Investigation and Research under the Competition Act if he was satisfied with the Act. The Director’s view was that, for the most part, the Act was working well and its approach was fundamentally sound. He felt, however, after nearly a decade of experience in applying the Act in its current form, there were some areas where improvements might be warranted. The Director noted that the Act had last been substantially amended in 1986, giving Canada a strong and effective law that had served Canadians well. However, he observed that developments such as the growth of technology and the liberalization of the global trading environment in the rapidly evolving marketplace of the 1990s had had an impact on competition law enforcement. As one of the key framework business laws in Canada, the Competition Act must be kept up-to-date in order to respond to emerging business trends.

Consequently, on 25 June 1995, Mr. Manley announced the commencement of a broad consultation process to update the Act, citing the "need to make some adjustments to address the rapid pace of change in world markets. Our objective is a more effective competition law to help shape a more innovative economy in Canada."

On 28 June 1995, the Director released a discussion paper entitled Competition Act Amendments and invited comments on how the Act should be amended. The paper was distributed to over 1,000 interested parties and was made available on the Internet. It outlined the areas that the Competition Bureau had preliminarily identified as perhaps warranting amendment and posed 60 questions on the direction such amendments might take. Over 80 responses were received from interested stakeholders, including consumer associations, businesses, and members of the legal, law enforcement and academic communities.

In light of the detailed and wide-ranging comments on the discussion paper, the Bureau initiated more specific consultations. Following the conclusion of the comment period, the Director established a Consultative Panel to review the comments and give him more detailed advice on the suitability and feasibility of areas proposed for amendment. Panel members reflected a broad cross-section of stakeholder interests: manufacturers, consumers, large and small retailers, the legal community, academia and a provincial securities agency.

The Competition Bureau took an active role in presenting detailed proposals to Panel members, reflecting an analysis of issues and comments received. Members, in return, brought some of their own proposals to the table. Although the Panel was the principal forum for discussion of proposed changes to the law, the Bureau also continued to seek the views of other stakeholders.

The Panel released it report on 10 April 1996, outlining its recommendations to the Director. The report provided the basis for the government’s proposed amendments to the Competition Act contained in Bill C-67, which died on the Order Paper in the last Parliament. The bill was subsequently reintroduced as the current bill, C-20, in this Parliament in substantially the same form but with some modifications, most notably the addition of new provisions that would:

Proposed amendments in Bill C-20 carried over from Bill C-67 would, among other things:

The most significant proposed changes to the Competition Act are noted below. References are made to the relevant clauses of the bill as well as to the appropriate sections or proposed sections of the Competition Act.

Prior to examining the proposed amendments to the Competition Act contained in Bill C-20, a brief overview of the current Act will be provided.

Combines and competition legislation has been in existence in Canada for more than 100 years. The current Act was last substantially amended in 1986 when a major overhaul was completed after many years of research and extensive public debate.

The Competition Act is a law of general application that, with few exceptions, applies to all businesses in Canada. The Act is designed to promote competition and efficiency in the Canadian marketplace and it has helped to bring about better-quality goods and services, competitive prices, and a wider variety of consumer choice.

The Act contains both criminal offences and non-criminal provisions, the latter being referred to as "reviewable matters."

Criminal offences include conspiracy, bid-rigging, discriminatory and predatory pricing, price maintenance and misleading advertising and deceptive marketing practices. These offences are prosecuted before the courts by the Attorney General of Canada. Those convicted of an offence may be sentenced to a fine and/or a term of imprisonment. Prohibition orders and interim orders may also be obtained from the courts upon application by the Attorney General.

Non-criminal reviewable matters include mergers, abuse of dominant position, refusal to deal, exclusive dealing, tied selling, market restriction and delivered pricing. In the case of large merger transactions, the parties are required to provide the Competition Bureau with advance notification of the proposed transaction and to wait a prescribed period of time before completing it in order to give the Director an opportunity to examine the transaction and determine whether it would have a harmful impact on competition. Following an inquiry into any of the reviewable matters under the Act, the Director may file an application before the Competition Tribunal, provided grounds exist to obtain a remedial order.

The Director of Investigation and Research, who is the head of the Competition Bureau at Industry Canada, is responsible for the administration and enforcement of the Competition Act.

The current Director of Investigation and Research would become, and would continue in office as, the "Commissioner of Competition" as reflected in proposed section 7 of the Competition Act (clause 38). The bill would formalize that official’s existing responsibility in relation to the administration and enforcement of certain labelling statutes. The Commissioner of Competition would be responsible for: the administration and enforcement of the Competition Act; the administration of the Consumer Packaging and Labelling Act; the enforcement of the Consumer Packaging and Labelling Act except as it relates to food, as that term is defined in section 2 of the Food and Drugs Act; and the administration and enforcement of the Precious Metals Marking Act, and the Textile Labelling Act (clause 4, proposed section 7.1).

The 1986 amendments to the Competition Act removed the merger provisions from the criminal law and made mergers a civil matter reviewable by the Competition Tribunal. A merger is essentially the acquisition of one or more business entities by another. The Act applies to every merger in Canada, even if it involves foreign-owned or controlled companies.

Companies are obliged to notify the Competition Bureau of a proposed merger when the two thresholds set out in the Act are met. Following notification, the parties are required to wait either seven or 21 days before completing the transaction; the period depends upon whether there was a short or long form filing. The Director conducts an examination during this period to determine if the proposal raises any competition concerns.

A merger that the Director believes will prevent or substantially lessen competition may be taken to the Competition Tribunal for review any time up to three years after completion of the transaction. If the Tribunal finds that the merger does prevent or substantially lessen competition, it may order the dissolution of the merger or the disposition of assets or shares. In the case of a proposed merger, the Tribunal may order that it not proceed, or, should the merger be completed, the Tribunal may prohibit the parties from doing anything that prevents or substantially lessens competition.

According to Industry Canada sources, an effective merger process benefits society by helping to maintain the competitive playing field that provides businesses and consumers with the best possible prices. The notifiable transaction provisions preserve the effectiveness of the review process because they allow for an assessment of the likely impact of a large merger on competition before the merger is completed.

In its report, the Consultative Panel noted that most transactions subject to notification do not raise competitive issues, but that in circumstances where such issues are raised, the Bureau had identified three main and interrelated problems. First, the information currently required under the pre-merger notification provisions of the Act is not always sufficient and relevant. Second, the waiting periods prescribed under the Act are sometimes too short to allow a full assessment of a transaction. Finally, there is no effective mechanism under the Act to prevent the closing or completion of a transaction unless the Director is prepared to challenge it before the Competition Tribunal.

The Panel made a number of recommendations concerning the requirements for prenotification associated with large merger transactions, of which two were recommendations to help the Bureau properly assess proposed transactions by improving information requirements in relation to pre-merger notifications and doubling the existing notification periods. The panel also recommended that the present interim order threshold under section 100 be lowered to provide the Director with a more effective mechanism for delaying the closing of a transaction in serious cases. Other recommendations addressed the need for legislative clarification in several related areas.

Proposed amendments to the Act contained in Bill C-20 would address the issues raised by the Bureau and clarify some ambiguities in the current law.

Parties required to pre-notify and supply information would be more clearly identified. The bill would also clarify when the acquisition of interests in a combination would be subject to prenotification (clause 27; proposed section 110(6)).

Pursuant to clause 31 of Bill C-20, parties subject to notification would continue to have a choice between filing either a short or long form; the information required to be included would be set out in the regulations rather than the Act, as is currently the case (proposed section 114(2)). More relevant information would be required than at present. The Commissioner would continue to have the discretion to require the long form filing if the short form filing was not considered sufficient.

Applicable waiting periods would be lengthened. According to clause 35 (proposed section 123), the waiting period before a proposed transaction could be completed would be increased to 14 days (from seven days) in the case of a short term filing and to 42 days (from 21 days) for the long form filing. Where voting shares were to be acquired through a stock exchange, the waiting period for long form filings would be 21 trading days, or such longer period of time (not exceeding 42 days) as the rules of the stock exchange might allow before shares must be taken up. However, the Commissioner, or a person authorized by the Commissioner, could shorten the waiting period provided he or she notified the persons who were required to give notice and supply information that the Commissioner did not intend to make an application for an order under section 92 in respect of the proposed transaction.

Deficiencies in the interim order provision (section 100) would be corrected to give the Commissioner sufficient time to pursue an inquiry under section 10. Conditions for obtaining interim orders would be relaxed so that the Commissioner could, while conducting an examination, seek to delay the closing of a merger transaction that gave rise to serious concerns. The interim order provision would be amended to allow such orders to be obtained in circumstances where serious concerns existed, but it had not yet become clear whether or not the Commissioner had, or would have, grounds to challenge the transaction.

Specifically, clause 24 of the bill would amend section 100(1) of the Act to empower the Tribunal in certain circumstances to issue an interim order forbidding any person named in the application from doing anything the Tribunal might interpret as being directed toward the completion or implementation of a proposed merger for which an application for an order had not been made under section 92 (or previously under section 100). These circumstances would be where : 1) the Tribunal found, on application of the Commissioner, that there had been a contravention of section 114 in respect of the proposed merger, or 2) the Commissioner certified that an inquiry being conducted pursuant to section 10(1)(b) needed more time to complete and the Tribunal claimed that the absence of an interim order would impair its ability to remedy the effects of the proposed merger on competition, because actions would likely be taken that would be difficult to reverse.

Failure to pre-notify would no longer be punishable by imprisonment but the fine would be increased to a maximum of $50,000 (clause 18; proposed section 65(2)).

Misleading advertising and deceptive marketing practices can have serious economic consequences, especially when directed towards large groups or when taking place over long periods of time. This is harmful to both competitors engaging in honest promotional efforts and consumers.

The current system for adjudicating misleading advertising and deceptive marketing practices cases relies exclusively on the criminal process. Representations that are false or misleading in a material respect are prohibited. Unsubstantiated performance and durability claims, misleading warranties and misrepresentations as to regular price fall into this category. Promotional contests are also subject to the Act. In addition, the Act currently prohibits double ticketing (where the higher of two prices marked on the product is charged), pyramid selling, sale above advertised price and "bait and switch" selling (when a product is advertised at a bargain price, but a reasonable supply is not available).

The Bureau’s 1995 discussion paper on Competition Act amendments noted that criminal prosecution as the sole legal instrument of government enforcement for misleading advertising and deceptive marketing practices has a number of shortcomings -- a lack of speedy decision-making, specialization and consistency in decisions. The paper further noted that criminal sanctions can be too severe a response for some instances of unintentional misleading advertising, even when the advertiser has failed to meet the due diligence standard. Invoking the criminal process can be unjustifiably expensive, and time and resource-intensive, for both the businesses involved and the Competition Bureau.

The paper pointed out that there had been continuing calls to provide a non-criminal adjudicative alternative and improved remedies since these provisions had last been substantially amended, in 1976. Studies have suggested that criminal sanctions are an incomplete response to misleading advertising (although they must be retained to ensure adequate deterrence in the most egregious cases). In June 1988, the House of Commons Standing Committee on Consumer and Corporate Affairs issued a unanimous report on misleading advertising (the "Collins Report"), recommending a series of non-criminal responses to it. As a result, the Competition Bureau engaged in extensive consultations culminating in the formation of a working group, chaired by Ed Ratushny, Q.C., to develop reform proposals. On 31 January 1991, the working group submitted a unanimous report to the Director, recommending a non-criminal adjudication alternative before the Competition Tribunal with a number of remedies -- cease and desist orders, restitution orders, orders directing payments towards consumer education and the publication of information notices.

In addressing the issue of misleading advertising and deceptive marketing practices, the recent Consultative Panel also supported the creation of an alternative civil regime. It recommended the adoption of a dual-track, civil/criminal system, whereby the choice of one adjudication system would foreclose the other. It recommended that only the multi-level marketing and pyramid selling provisions (sections 55 and 55.1) as well as an amended general misleading advertising provision (with the addition of a subjective mens rea requirement, and an increase in the maximum fine on summary conviction to $200,000) be retained under the proposed criminal regime, for the most egregious cases. It proposed that the remaining misleading advertising provisions be re-enacted as civil reviewable matters. The Panel noted that recourse to an adjudicator rather than the criminal courts would have a number of advantages, including: fast and efficient remedial action; avoidance of a criminal stigma; the opportunity for the Tribunal to develop expertise in adjudicating such matters; and better use of Bureau resources. The new civil regime proposed by the Panel would encompass four main types of remedies: interim and final cease and desist orders; marketplace information notices; and civil monetary penalties. The last two remedies would be available only in the absence of due diligence. It would also be possible to obtain orders on consent upon application to one of three adjudicators: the Competition Tribunal, the Federal Court - Trial Division, or a provincial superior court.

In line with the Panel’s recommendations, the amendments proposed in Bill C-20 would change the focus of the misleading advertising and deceptive marketing practices provisions, from punishment to quick and efficient compliance, through the creation of a "hybrid" criminal/civil regime with the features set out below.

Clause 12 of Bill C-20 would retain a general criminal prohibition, similar to that in the current section 52(1)(a), to address the most serious cases of misleading advertising. Proposed section 52(1) would make it an offence for a person, for the purpose of promoting the supply of a product or any business interest, by any means whatsoever knowingly or recklessly to make a representation to the public that was false or misleading in a material respect. "For greater certainty," in establishing that this provision had been contravened, it would not be necessary to prove that any person had been deceived or misled (proposed section 52(1.1)).

The maximum fine in respect of summary conviction proceedings for the above offence would be increased from the current $25,000 to $200,000 to reflect the seriousness of the new criminal provision (clause 12(3); proposed section 52(5)(b)).

The House of Commons Standing Committee on Industry amended clause 12 to add proposed section 52(1.2) clarifying, for greater certainty, that the reference to the making of a representation in proposed section 52 (representations – criminal), proposed section 52.1 (deceptive telemarketing), proposed section 74.01 (representations, ordinary price – reviewable matters), and proposed section 74.02 (representations as to reasonable test – reviewable matters) would include permitting the making of a representation. This would ensure that the persons who were responsible for the making of a representation, as well as the person actually making it, would be covered by the Act.

The current criminal provisions set out in sections 55 and 55.1 (multi-level marketing and pyramid selling) would remain. Hence, a criminal regime would continue to be in place to deal with the most serious cases of misleading advertising, as well as those cases involving multi-level marketing and pyramid selling.

Pursuant to clause 22, a new civil regime (proposed Part VII.1 of the Act) would be created. Under this, all the existing misleading advertising and deceptive marketing practice provisions would be re-enacted as reviewable matters under the new Part VII.1 of the Act, except the provision on referral selling, which would be repealed, and the provisions on multi-level marketing and pyramid selling, which would remain criminal offence provisions. In other words, most of the current criminal offences pertaining to misleading advertising and deceptive marketing practices would be replaced by analogous reviewable conduct provisions. As noted above, however, a general misleading representation provision would continue to exist under the criminal regime. While clause 14 would initially have repealed the current section 54 of the Act covering the summary conviction offence of double ticketing, the House of Commons Standing Committee on Industry amended the clause to delete the proposal for such repeal. Accordingly, double ticketing would remain an offence under the Act. The Committee also made a related amendment to clause 17 to delete the reference to the repeal of section 60. It added a new clause 17.1, which would retain, in proposed section 60, the publisher’s defence to double ticketing contained in current section 60(1). The end result would be retention of the status quo with respect to the double ticketing offence.

Available remedies under the proposed civil regime would include: temporary and final cease and desist orders; administrative monetary penalties; information notices; and consent orders. Further details are set out below.

A "court," for the purposes of proposed sections 74.1 to 74.14 (in proposed Part VII.1 of the Act), discussed below, would mean a single judicial member of the Competition Tribunal (either the Chairman or a judicial member designated by the Chairman); the Federal Court, Trial Division; or a provincial superior court (clause 22; proposed section 74.09; and clause 43).

Where, on application by the Commissioner, a court determined that a person was engaging in, or had engaged in reviewable conduct under proposed Part VII.1, the court could order the person not to engage in the same or substantially similar reviewable conduct (proposed section 74.1(1)(a)). Such an order would apply for 10 years unless the court specified a shorter period (proposed section 74.1(2)). The court could also order the person to publish a notice of the name under which he or she carried on business and the determination made under the provision and to bring this to the attention of the class of persons likely to have been reached or affected by the conduct (proposed section 74.1(1)(b)). In addition, the court could order the person to pay an administrative monetary penalty in an amount not exceeding, a) in the case of an individual, $50,000 and, for each subsequent order, $100,000, and b) in the case of a corporation, $100,000 and, for each subsequent order, $200,000 (proposed section 74.1(1)(c)). The Act would include a list of aggravating or mitigating factors that would have to be taken into account in determining the amount of the administrative penalty; for example, the frequency and duration of the conduct and the injury to competition in the relevant geographic market (proposed section 74.1(5)). The Act would also set out the meaning of a subsequent order for the above purposes (proposed section 74.1(6)). The amount of an administrative monetary penalty imposed on a person under section 74.1(1)(c) would be a debt due to the federal Crown and could be recovered as such from that person in a court of competent jurisdiction (proposed section 74.15).

No order could be made against a person under sections 74.1(1)(b) or (c) where the person established that he or she had exercised due diligence to prevent the reviewable conduct (proposed section 74.1(3)). As well, the terms of an order made against a person under proposed sections 74.1(1)(b) or (c) would have to be determined with a view to promoting conduct in conformity with the purposes of proposed Part VII.1, and not with a view to punishment (proposed section 74.1(4)).

Provision would also be made for a temporary order (proposed section 74.11). Where, on application by the Commissioner, a court found a strong prima facie case that a person was engaging in reviewable conduct under proposed Part VII.1, the court could order the person not to engage in that or substantially similar reviewable conduct. To do so, the court would have to be satisfied that: a) unless the order were issued, serious harm would be likely to ensue, and b) the balance of convenience favoured granting the order. Such an order would have effect for a period specified, which would not exceed 14 days, unless agreed to by the person against whom the order was sought or unless, on further application, the order was extended for an additional period not exceeding 14 days. Normally, at least 48 hours’ notice of the above application would have to be given by, or on behalf of, the Commissioner to the person in respect of whom the order or extension was sought.

According to proposed section 74.12, where an application was made to a court for an order under proposed Part VII.1 and the Commissioner and the person against whom the order was sought agreed on its terms, the order agreed to could be filed with the court for immediate registration, regardless of whether any of the terms could have been imposed by the court under proposed Part VII.1. On being filed, such an order would be registered and would have the same force and effect, and all proceedings could be taken, as if it had been made by the court.

An order made under proposed Part VII.1 could be rescinded or varied by the court that had made it where, on application by the Commissioner or the person against whom the order was made, the court found that the circumstances that had led to its making had changed and that, in the present circumstances, the order would not have been made or would have been ineffective in achieving its purpose (proposed section 74.13).

No application could be made by the Commissioner for an order under proposed Part VII.1 of the Act against a person, where criminal proceedings had been commenced under proposed section 52(1) against that person on the basis of the same or substantially the same facts (proposed section 74.16). Similarly, no criminal proceedings could be commenced under section 52 against a person against whom an order was sought under Part VII.1 on the basis of the same or substantially the same facts (clause 12; proposed section 52(7)).

Any decision or order made under proposed Part VII.1 by the Tribunal or the Federal Court - Trial Division, or any refusal to make such an order, could be appealed in the Federal Court of Appeal. An appeal from such a decision or order by a superior court of the province could be brought in the court of appeal of a province. Where the Federal Court of Appeal or the court of appeal of a province allowed an appeal under this provision, it could quash the decision or order, could refer the matter back to the court appealed from, or could make any decision or order that, in its opinion, that court ought to have made (proposed section 74.18).

An appeal from a decision or order made under proposed Part VII.1 on a question of fact could be brought only with the leave of the court appealed to (proposed section 74.19).

Consumers often shop around or wait for products to go on sale rather than buying at the "regular" price. Regular price representations and related savings claims can, therefore, be a powerful marketing tool. The current section 52(1)(d), which was enacted in 1960, prohibits materially misleading representations to the public concerning the price at which a product or like products have been, are, or will be ordinarily sold. Although the provision does not explicitly mention sales volume as the relevant criterion, it has been the Bureau’s long-standing position that the provision requires advertisers to base such claims on the price at which a substantial volume of sales has taken place.

When the Bureau was considering areas for amendment, members of the retail industry expressed concern that the existing law lacked sufficient clarity to determine the circumstances in which advertisers could make ordinary or regular price claims. They asserted that a significant percentage of retailers were unable to comply with a test based on sales volume and that a time-based test would be preferable, given consumer conceptions. In their view, the current provision discouraged innovative pricing strategies. Accordingly, the Bureau added to the consultation process the question of whether the volume test in the Act adequately reflected marketplace reality.

The Consultative Panel recommended the introduction of a new civil law provision to replace the current criminal provision in section 52(1)(d). It proposed as well that the current "volume" test be replaced with an alternative "volume" or "time" test for determining whether there had been a misrepresentation as to a regular price claim. The recommendations also encouraged the Bureau to adopt enforcement guidelines to address industry practices relating to such things as comparisons of manufacturers’ suggested retail prices and clearance sales.

Clause 22 of Bill C-20 would make misleading representations of ordinary prices reviewable matters under the proposed civil misleading advertising and deceptive marketing practice regime to be set out in the proposed Part VII.1 of the Act.

Subject to proposed section 74.01(3) noted below, a person would be engaging in reviewable conduct who, for the purpose of promoting a business interest or the supply or use of a product, made a representation by any means to the public concerning the price at which a product or like products had been, were being, or would be ordinarily supplied where suppliers generally in the relevant geographic market, having regard to the nature of the product,

Under another provision, a person would be engaging in reviewable conduct who for the purpose of promoting any business interest of the supply or use of a product, had represented a price to be the one at which the product or like products had been, were being, or would be ordinarily supplied by that person where that person, having regard to the nature of the product and the relevant geographic market,

In other words, where the comparison price was clearly specified to be the price of the advertiser, the tests would apply with reference to the prices of that person alone, rather than in relation to the price of suppliers generally in the relevant geographic market (proposed section 74.01(3)).

The above proposed provisions would not apply to a person who established that a representation as to price was not false or misleading in a material respect in the circumstances (proposed section 74.01(5)).

It is thus clear that where, on application by the Commissioner, a court under proposed Part VII.1 found a person to be engaging in reviewable conduct under either proposed section 74.01(2) or 74.01(3), the person would have to have failed both ( not only one of) the volume-based and time-based tests set out therein. In a case where a person’s conduct was found to be engaging in reviewable conduct under either proposed section 74.01(2) or 74.01(3), the available remedies under the proposed civil misleading advertising and deceptive marketing practices regime, discussed above, would apply.

Section 34 of the Competition Act establishes authority for the courts to issue prohibition orders. Section 34(1) specifically provides that, in addition to any other penalty imposed on a person convicted of any offence under the Act, a court may issue an order prohibiting that person from continuing or repeating the offence, or from doing anything directed toward the continuation or repetition of the offence. Under section 34(2), prohibition orders are also available without securing a conviction, either on consent or on a contested basis.

Although prohibition orders have been widely used and are very useful in prohibiting certain conduct, the above authority does not permit the issuance of prescriptive terms that would require the accused to take positive steps or engage in certain conduct. As well, currently there are no provisions in the Act that allow for a prohibition order to be varied or rescinded.

In its discussion paper, the Bureau proposed broadening section 34 to include any prescriptive terms that a court agreed would overcome the effects of the anti-competitive practice in question.

The Consultative Panel favoured creating a general power to include prescriptive terms in orders in cases where all parties consented. With contested proceedings, however, the Panel felt that prescriptive terms should be directed only towards preventing the continuation or repetition of the offence, being concerned lest broader authority could lead to excessively onerous terms. The panel also recommended that there be a power to vary, rescind or interpret any order at the request of any party to the order or the Attorney General and was of the view that the Act should require the court to specify a time limit for an order, with a maximum statutory time limit of 10 years.

Clause 11 of Bill C-20 would amend section 34 of the Act to make a prohibition order a more effective tool. According to proposed section 34(2.1), an order under section 34 in relation to an offence could require any person a) to take such steps as the court considered necessary to prevent the commission, continuation or repetition of the offence; or b) to take any steps agreed to by that person and the Attorney General of Canada or of a province. In other words, a prescriptive term could be included in an order if all parties to the order consented. In the case of a contested application, however, a court would be able to make a prohibition order containing prescriptive terms, which would be limited to preventing the commission, continuation or repetition of the offence.

An order made under section 34 would apply for a period of 10 years unless the court specified a shorter period (proposed section 34(2.2)). The court that made the order could vary or rescind it in respect of any person to whom it applied, where the court found that the circumstances that had led to its making had changed and, in the circumstances that now existed, the order would not have been made or would have been ineffective in achieving its purpose (proposed section 34(2.3)). It would also be possible for a court to vary or rescind an order where the Attorney General of Canada or a province and the person against whom the order had been made gave their consent (proposed section 34(2.3)). The court’s power to vary or rescind a prohibition order would also apply to those prohibition orders issued prior to the coming into force of clause 11 of the bill (clause 40).

No criminal proceedings could be commenced under Part VI of the Act against a person against whom an order was sought under section 34(2) on the basis of the same or substantially the same facts (proposed section 34(2.4)).

Deceptive and fraudulent telemarketing practices generally involve representations, made by telephone, for the purpose of promoting the sale of products or other business interests that either do not exist or have grossly exaggerated values. Detecting and preventing deceptive telemarketing is complicated by a number of factors. The operations frequently involve "fly-by-night" companies that, once detected, close down quickly, change corporate identities readily and hide operators’ personal assets to avoid seizure. Operators also often shield themselves from potential liability for representations made by their employees.

According to departmental sources, approximately $60 million was lost in Canada in 1995 alone as a result of fraudulent telemarketing activity. Although deceptive telemarketers target all groups in society, they tend to focus on those that are most vulnerable, such as senior citizens. The department indicated that public education and industry initiatives have had some impact on addressing this problem. However, it pointed out that, with diminishing resources available to law enforcement agencies, new statutory provisions providing tools for dealing with deceptive telemarketing practices could result in more effective enforcement.

In the United States, it was estimated that $40 billion had been lost each year as a result of fraudulent telemarketing activity. That country responded to the problem by enacting legislation that, among other things, prohibits specified abusive telemarketing practices and places elaborate affirmative disclosure requirements on all telemarketers.

The Consultative Panel acknowledged that deceptive telemarketing was a serious problem in Canada that required legislative action by the federal government (as opposed to the provinces), because of the problem’s international and interprovincial dimensions. The Panel did not consider that it was in a position to make a concrete recommendation for legislative reform in this area, however. Nevertheless, it recognized the merit of furthering public debate and discussion of this issue, and concluded that it would be helpful to append to its report a draft legislative proposal, developed by the Competition Bureau, for making deceptive telemarketing a strict liability offence. Special affirmative disclosure obligations would be imposed on telemarketers. The maximum fine available on summary conviction for this proposed offence would be $200,000, while the maximum fine on indictment would be in the discretion of the court. Liability would extend to employees of agents of telemarketers. An injunctive relief remedy would also be introduced, to be made applicable not only to alleged deceptive telemarketers, but also in certain cases to third party product or service suppliers of such telemarketers.

Bill C-20 would introduce new statutory provisions to provide tools for dealing with deceptive telemarketing practices and to facilitate more effective and efficient enforcement. Clause 13 of the bill would add a new legislative provision to Part VI of the Competition Act (proposed section 52.1) to make it a criminal offence to participate in or operate a scheme of deceptive telemarketing. "Telemarketing" would be defined for purposes of proposed section 52.1 to mean "the practice of using interactive telephone communications for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest" (proposed section 52.1(1)).

Telemarketers would be required to disclose certain types of information during the telephone call. Specifically, according to proposed section 52.1(2), no person would be permitted to engage in telemarketing unless:

The above disclosures would have to be made in a fair, reasonable and timely manner.

Proposed section 52.1(3) would prohibit a person who engaged in telemarketing from:

In a prosecution of a person who in telemarketing had made a representation that was false or misleading in a material respect, the general impression conveyed by the representation, as well as its literal meaning, would have to be taken into account in determining whether or not the representation was false or misleading in a material respect (proposed section 52.1(4)).

Disclosures of information set out in proposed sections 52.1(2)(b) or (c) or 52.1(3)(b) or (c) referred to above would have to be made during a telephone communication unless the accused established that the information had been disclosed by any means within a reasonable time before the communication and the information had not been requested during the telephone communication (proposed section 52.1(5)).

No person could be convicted of an offence under proposed section 52.1 who established that he or she had exercised due diligence to prevent the commission of the offence (proposed section 52.1(6)). However, notwithstanding the above, in the prosecution of a corporation for an offence under proposed section 52.1, it would be sufficient to establish that the offence had been committed by an employee or agent of the corporation, regardless of whether the employee or agent was identified, unless the corporation established that the accused had exercised due diligence to prevent the commission of the offence (proposed section 52.1(7)).

Where a corporation committed an offence under proposed section 52.1, any officer or director of the corporation who was in a position to direct or influence its policies in respect of the prohibited conduct would be a party to and guilty of the offence and would be liable to the punishment provided, regardless of whether the corporation had been prosecuted or convicted, unless the officer or director established that he or she had exercised due diligence to prevent the commission of the offence (proposed section 52.1(8)).

According to proposed section 52.1(9), a person who contravened proposed section 52.1 would be guilty of an offence either on summary conviction (less serious matters) or indictment (more serious matters). On conviction on indictment, the person would be liable to a fine in the discretion of the court, or to imprisonment for a term not exceeding five years, or to both. On summary conviction, the person would be liable to a fine not exceeding $200,000, or to imprisonment for a term not exceeding one year, or to both.

Proposed section 52.1(10) provides a non-exhaustive list of aggravating factors that the court would have to consider in sentencing a person convicted of an offence under proposed section 52.1. Those factors would include: the use of lists of persons previously deceived by telemarketing; the targeting of particularly vulnerable persons; the amount of the proceeds realized by the person from the telemarketing; the repetition of telemarketing offences; and the manner in which information was conveyed, including the use of abusive tactics.

Deceptive telemarketing can cause considerable harm to the marketplace in a short period. Although a criminal offence provision is an appropriate means of deterring such conduct and punishing offenders, there are cases where it would be desirable to be able to halt the offending conduct, pending disposition of the criminal case before the courts. Accordingly, clause 10 of the bill would amend section 33, the interim injunction provision of the Competition Act, to provide easier access to such an order in the case of telemarketing (proposed section 33(1)(b)). In addition, an interim injunction issued in respect of an offence under proposed section 52.1 could compel third party suppliers to withhold products likely to be used for the commission of an offence under proposed section 52.1 from a person (or, in the case of a corporation, any of its officers or directors) who had previously been convicted of an telemarketing offence under proposed section 52.1 or section 52 for conduct prohibited under proposed section 52.1, or who had been punished for the contravention of an order made under sections 33 or 34 in respect of the commission, continuation or repetition of such an offence (proposed section 33(1.1)).

In order to combat the most serious cases of deceptive telemarketing, as well as conspiracy and bid-rigging, as set out in sections 45, 47 and proposed section 52.1 of the Competition Act, clause 47 of the bill, as it initially appeared, would have amended the Criminal Code to permit judicially authorized interception, without consent, of private communications. The House of Commons Standing Committee on Industry amended clause 47, however, to limit the possibility of wiretap without consent in relation to the telemarketing offences in proposed section 52.1 to those involving deceptive marketing practices under proposed section 52.1(3). Thus, authorization to wiretap without consent could not be obtained in cases where there were allegations of failure to disclose as required under section 52.1(2). In addition, the Committee limited the possibility of wiretap without consent in relation to conspiracy offences under section 45 of the Competition Act to such offences involving price fixing or market sharing.

A number of other amendments would be made to the Competition Act, many being of a technical or housekeeping nature. As well, consequential and related amendments would be made to a number of other Acts.

The House of Commons Standing Committee on Industry added clause 1.1 to amend the definition of a "business" in section 2(1) of the Act to include fundraising for charitable or other non-profit purposes. Persons engaged in fundraising efforts would be considered to be promoting a business interest and would thus clearly be covered by the telemarketing and deceptive marketing provisions of the Act.

The House of Commons Standing Committee on Industry also amended clause 19 of the bill by adding proposed sections 66.1 and 66.2 to the Competition Act to deal with whistleblowing. The Senate subsequently removed the proposed whistleblowing provisions but they were reinstated in the House with some changes that were ultimately accepted by the Senate. Under proposed section 66.1, an individual could seek confidentiality with respect to information he or she might provide to the Commissioner of Competition about contraventions of the Act. Under proposed section 66.2, an employer would be prevented from taking adverse employment action against an employee who, acting in good faith and on the basis of reasonable belief, had provided information to the Commissioner.

In its report to the House on the bill, the House Committee emphasized that the bill’s proposal to move certain provisions from criminal to civil adjudicative jurisdiction would not imply that earlier precedents regarding the criminal provisions could be re-opened for debate. In other words, settled jurisprudence would continue to apply to the interpretation of the criminal provisions in the Competition Act.

The amendments to the Competition Act proposed in Bill C-20 generally deal with issues that have proven, through consultations and study, to be important areas of reform on which there is public consensus for a need for change. The proposals were developed in close consultation with a broad cross-section of marketplace stakeholders, including businesses, associations, consumers, and members of the legal, law enforcement and academic communities. Their views were sought through the circulation of the Bureau’s discussion paper and the subsequent creation of a Consultative Panel, whose report provided the basis for the government to move ahead with the bill.

The following eight areas were listed in the Bureau’s discussion paper as being considered for possible amendment to the Competition Act: notifiable merger transactions; the protection of confidential information and mutual assistance with foreign competition law agencies; misleading advertising and deceptive marketing practices; "regular price" claims and section 52(1)(d); price discrimination and promotional allowances; access to the Competition Tribunal by private parties; prohibition orders; and deceptive telemarketing solicitations. Proposed amendments in five of those areas, as discussed above, are included in Bill C-20.

In his speech to the 1996 annual competition law conference of the Canadian Bar Association, held in Ottawa on 27 September 1996, the Hon. Martin Cauchon Secretary of State (Federal Office of Regional Development – Quebec), who, at the request of the Minister of Industry, had at the time taken on additional responsibilities relating to Competition Act amendments, stated that the government had decided not to proceed on two of the proposals in the discussion paper: access to the Competition Tribunal by private parties and repeal of the provisions dealing with price discrimination (section 50(1)(a)) and promotional allowances (section 51). He noted that these proposals had met with strong, although by no means universal, opposition from segments of the business community. As a result, the government had decided that they warranted further study.

Mr. Cauchon further noted that, in addition to the above two elements, the government had decided not to proceed with amendments on confidentiality and international mutual assistance, not because of stakeholder opposition, but because of recent court developments. He believed it would be prudent to hold up amendments in this area until certain Charter issues were clarified.

According to Mr. Cauchon, periodic review of the operation of framework laws like the Competition Act is necessary in order to ensure that they keep pace with changes affecting the Canadian economy.

In the fall of 1997, the bill’s proposed amendment to allow judicially authorized interception, without consent, of private communications, (in order to combat the most serious cases of deceptive telemarketing, conspiracy and bid rigging) was discussed with selected members of the business community, consumer groups, the Bar, and direct marketers’ associations. In a recent news report, a senior competition lawyer described this proposal as "heavy-handed"; in his opinion, the business community "would be skeptical of any proposals to give any government agency the right to tap phones, even with a judge’s order."