Winnipeg Free Press

Winnipeg Free Press (Newspaper) - January 8, 1976, Winnipeg, Manitoba Winnipeg free press thursday january 8, 1976 a russian talks about detente and sees Success one can safely assert that the development of a new Competition policy for Canada has not been an easy task to some of its opponents Competition legislation is clearly something to be placed in a catalogue of horrors matched Only perhaps by plagues incest or tax Reform. The Long debate Over the Competition Bill or More precisely Bills has certainly been characterized by much sound and fury. The obvious question is Why has the government persisted in its efforts the simple answer to that question is this the evidence is quite Clear that an effective Competition policy can con Tibule to the strength of the Economy and the welfare of canadians All canadians we do not yet have an effective Competition policy and in face of the changes taking place in the approach by Oiler coun tries and particularly our trading partners Canada s present anti com Bines legislation is proving to be dangerously behind the times goal efficiency the primary objective of Competition policy is to promote efficiency is of course something that depends on a combination of factors including receptive attitudes beneficial organizational and institutional structures and a favourable economic environment. But when Competition policy is work ing Well it will help encourage a High level of economic performance and make a not insignificant contribution to seeing that the Economy s scarce resources Are used to their Best advantage in meeting the demands of Consumers. In this sense Competition policy should commend itself to All Market participant. For Consumers Well function aug competitive markets mean greater product Choice and the Avail ability of higher Quality and lower priced goods and services than would otherwise exist. For producers there will be an increased incentive to innovate to keep costs Down. And to eliminate sloppiness. And for canadians generally an affective Competition policy will help in the achieve ment of a Strong rate of economic growth when the economic Council of can Ada issued its interim report on com petition it was careful to Point put hat a competitive Market is not something to be sought for its own Sake the goal we should be striving for is efficiency. Competition is important because and Here j quote the Council competitive forces where available provide the surest stimulus to the efficient production of goods and in other words there May be circumstances in which is inimical to efficient performance but As a Rule Competition policy should be directed to promoting a situation of every Man for himself and May the least competent get hammered. Fairness this description harsh As it May sound paradoxically reflects what to Many is perhaps the most appealing aspect of Competition its Confor finance with a very Basic if perhaps increasingly unfashionable notion of fairness. Fairness in this sense de scribes a situation in which individuals Are free to compete and limited Only by their desire and ability to do an effective Competition policy will remove artificial restraints from the Market and substitute regulation by Market forces for regulation by Industry or by government. In this connection it s Worth stress ing that the importance attached to Competition policy in a sense constitutes a reaffirmation of the govern end oration of the fundamental legitimacy of the Market in a pluralist what is being said in effect is that the Basic economic questions of what is produced How and for Akhom can in most cases Best be an swered not through increased govern in Cut intervention and regulation but through the Etc play of Market forces. The function of Competition is to encourage these strengthen the invisible hand which has Over the years become increasingly palsied. Of special importance in today s in Competition Law creative Dynamo Canada s Competition Bills which have become known simply As Bill c-2 have been approved by parliament and received Royal assent in december. Here is an abridged version of a speech in Toronto by Sylvia Ostry Canada s Deputy minister of consumer and c o r p o rat e affairs explaining the significance of the new legislation. Vir Onraet is Hie role of Competition policy As a potential weapon in the Long term Battle against inflation. It seems Clear that at times Large and powerful industries have played an important leadership role in the inflationary process the Price and wage increases established by these Indus tries have very often been the targets at which others with less Market Power aim. Firmer basis As Well there is considerable Evi Dence that prices in concentrated in d t r i e s Are less responsive to changes in the general level of Busi Ness activity. This suggests that by reducing opportunities for the exercise of Market Power Competition policy can help to provide a firmer basis for the operation of the traditional eco nomic levers and a greater Prospect for Success in controlling inflation. I would argue that important features of the Canadian Economy make it particularly essential that we develop an effective Competition policy. 1 am thinking especially about the degree of openness of the Canad an Economy and the extent to which our collective Prosperity rests on the ability of Canadian Industry to main Tain its International competitiveness. I also have in mind some data which indicate a disturbing level of concentration in the Canadian econ omy. A study by my department showed that in 1965, there were Active corporations in Canada but that the 174 largest accounted for half of total corporate assets. The same study showed further that Industrial concentration is consider ably higher in Canada than in the . The 50 largest manufacturing companies for example accounted for 30 per cent of total manufacturing value added in Canada As compared with 25 per cent in the . These Fig ures suggest the existence of consider Able Market Power and they indicate that the Canadian Economy May be particularly vulnerable to abusive and detrimental Market practices. The degree of concentration in can Ada is perhaps partly understandable in View of the relatively Small domes tic Market. But there is considerable evidence that despite the highly concentrated Structure of Canadian Industry production units in this country tend to be excessively diversified Are often undersized and Are typically unable to exploit potential economies that Are available from longer production runs. Disturbing a number of studies have linked Bolli the Structure and performance of Canadian Industry to the weakness of competitive stimuli in the Canadian economic Milieu. These findings Are disturbing. They suggest that a number of policies which May have had the effect of sheltering Domestic Industry Are perhaps in need of care Ful reassessment and they make it quite evident that we have not been getting Good value from our Competition legislation. The origin of Competition legislation can be traced Back to an 1ss9 act prohibiting conspiracies and combinations in restraint of Trade. However it was not until 1910 and the passage of the first combines investigation act that machinery existed for the investigation of alleged of fences. The intention of the 1910 act As Mackenzie King then prime min ister put it in his inimitable Way was Sylvia Ostry to prevent the mean Man from pro fiting in virtue of his to this effect the legislation was Replete with qualifications some of which were retained through subsequent re visions. It is still the Case that unlawful agreements and combinations Are those which unduly Lessen Competition Lille Protection in the recent period the main change involved the insertion of provi Sions relating to misleading Advertis ing. At the same time however the deficiencies of the legislation became increasingly apparent. It became Evi Dent that the act did not provide the machinery to protect Small business men against several forms of abuse by dominant suppliers. Nor did the act provide adequate Protection for Consumers against false Market information. The Only possibility for the recovery of damages suffered As a result of in competitive behaviour was to Institute costly and highly Uncertain criminal proceedings. Moreover the Legisla Tion with its basis in criminal Law provided for an inflexible approach which is ill suited for dealing with several potentially beneficial business practices. In Short attempts to apply Competition policy made it amply Clear that Canadian combines Legisla Tion was badly in need of Reform. This same Point comes through even More forcefully from an examination of developments in other industrialized countries. In the period since the second world War there has been an unmistakable thrust among most of Canada s main trading partners for More rigorous implementation of Competition policy. Japan Australia Britain West Germany to name a few and the european eco nomic commission itself have devel oped major new anti Trust legislation since the War. In Europe generally there has recently been a substantial increase in the number of anti Trust cases undertaken an indication of a greatly unchanged commitment to Competition. And in the ., where the term Competition has always had overtones of ideological Zeal restrictive practices Are being pursued with in creased vigor. What these developments signify is that with respect to Competition policy Canada has some considerable Yard age to make up. Until Bill c-2, we had the dubious distinction of being the Only Industrial country to exclude ser vices from our anti Trust legislation. While Canada remained confined by its strict adherence to a criminal Law approach european countries had rather successfully adapted civil Law to the requirements of anti Trust policy and the . A combination of criminal and civil Law. Canada s approach to mergers moreover raises some questions in the face of . Experience which indicates the importance to As it were nip in the Bud Industrial formations which Are Likely to result in monopolies As one distinguished expert has noted when enterprises become Large and powerful attempts to control their Power by anti Trust proceedings Are few and successes fewer. Multinationals another serious limitation of Cana Dian policy is related to the operation of multinational corporations. What has become of particular concern is the attempt by the . Government to extend its own anti Trust legislation to the operation of subsidiaries of . Corporations located in Canada. This phenomenon of extra Terri Toria Lity raises both practical prob lems and fundamental questions about Canada s ability to assert its sovereignty. The failure of Canadian legis lation to Deal with this problem and to help ensure that . Anti Trust de crees do not frustrate Canadian policy objectives had to be remedied the highlights of Bill c-2 include Extension of the combines act s prohibitions to All services ;