Competition Bureau Explains Its Market Studies Process

On September 19, 2018, the Competition Bureau issued its final Market Studies Information Bulletin, five months after releasing a draft for public consultation. The Bulletin describes the different steps followed by the Bureau when conducting market studies, from economic sector identification to report follow-up. Despite the fact that it has no formal powers to carry on such studies, the Bureau has conducted four market studies since 2007, including one on Canada’s FinTech (see our previous article), and is currently leading a market study on Canada’s broadband internet services industry. The Bulletin was published to provide certainty and predictability to market studies participants and stakeholders, including with respect to the treatment of confidential information.

I. Economic Sector Selection

Market studies must be distinguished from enforcement initiatives led by the Bureau, such as mergers review or cartel investigations. As mentioned in the Bulletin, market studies are usually carried on exploratory grounds, to address regulatory concerns, influence the industry’s stakeholders or examine the competition issues created by new market trends. Market studies are generally initiated in the absence of an apparent infringement of the Competition Act, but when legislation, regulations, policies, structural barriers or other factors appear to impede competition in a sector.

Before starting any market study, the Bureau identifies which economic sectors could benefit from the agency’s resources. The Bureau indicates that it generally looks for sectors where information or complaints have been received from stakeholders, raising concerns about competition and efficiency. Regulatory activity, public debates, requests from governmental bodies and information from other competition agencies are also examined.

The Bureau first conducts a preliminary evaluation of the contemplated economic sector, including the availability of information, the resources required and the effects such a study would have on the Canadian economy. As explained in the Bulletin, in most cases, the Bureau avoids conducting a market study that overlaps with its enforcement activities. Stakeholders may be contacted at this preliminary stage, to confirm that the Bureau’s approach is relevant and that the industry’s needs are properly considered. Once a sector has been identified, the Bureau sets the scope of the market study to ensure that the main aspects of the competition concerns are addressed.

II. Market Studies Methodology

  • Notice

The Bureau typically issues a notice at the beginning of a market study, detailing its objective and scope.  Information is also provided regarding prior Bureau activities in the selected industry, participation of other governmental counterparts, important dates and ways to get involved into the process.

  • Information Gathering and Confidentiality Issues

At this stage, the Bureau seeks to obtain information on impediments to competition with respect to the chosen economic sector, including relevant legal frameworks, market dynamics, barriers to entry and structure of the supply chain. The Bureau cannot constrain stakeholders in order to obtain information for its market studies; it therefore mainly relies on voluntary disclosures, interviews with stakeholders, publicly available information, co-operation with other governmental counterparts (in Canada or abroad) and information gathered during previous investigations.

Confidential or commercially sensitive information transmitted to the Bureau in the course of a market study is protected under section 29 of the Competition Act. Stakeholders should identify such information when communicating with the agency in order to avoid its publication as part of the study’s final report. Nevertheless, the Bureau underlines that it has the discretion to communicate confidential information obtained as part of market studies in certain circumstances, including for the communication with a Canadian law enforcement agency. More importantly, the Bulletin clearly states that the evidence obtained during the market study process can be used by the Bureau to initiate or pursue formal enforcement actions.

  • Analysis of Competitive Landscape

Using gathered empiric data, the Bureau appraises the competition dynamic in the economic sector in order to identify impediments. According to the Bulletin, quantitative information is processed and analyzed through econometric techniques and linked with the qualitative information obtained by the Bureau. After identifying the probable roots of the sector’s competition barriers, the Bureau formulates recommendations for regulatory bodies, policymakers, industry associations or other stakeholders, such as alternative regulatory measures.

The Bureau might decide to discontinue or redirect the range of a market study if the information gathered indicates that the sector’s competition dynamic is less problematic than expected, if the market structure is modified, if regulatory changes are being introduced or if enforcement actions are undertaken. Following its competition analysis, the Bureau undertakes prepublication consultations with stakeholders to validate the accuracy of its recommendations.

  • Report and Recommendations

Once the consultation process is over, the Bureau publishes its final report online, along with a news release. Depending on the complexity of the study, the Bureau indicates that a report is generally issued in the 12 to 18 months following the initial market study notice. The report will expose the sector’s competition dynamic and regulatory framework, the Bureau’s recommendations and the study’s methodology. In the Bulletin, the Bureau mentions that it pays particular attention to other public policy objectives in its market study reports and aims at proposing useful and pragmatic solutions to promote innovation and competition in Canada.

  • Tracking the Results

The Bureau indicates that it will, after making its report public, oversee its effects on the sector’s legal framework. The Bulletin explains that the Bureau may cooperate with the policymakers to facilitate the use of the report, or provide further information to stakeholders. Furthermore, in the years following the publication of the report, the Bureau can produce a post-study assessment of the sector and provide updated recommendations to the policymakers.

McCarthy Tétrault Notes

According to the Bulletin, market studies are not meant to lead to penalties or sanctions before the courts. Nevertheless, the Bureau does mention that market studies may trigger subsequent enforcement actions and investigations. Although confidential information obtained during a study is confidential under section 29 of the Competition Act, this provision permits the further use of the information for the administration or enforcement of the Act and for its communication to a Canadian law enforcement agency. Moreover, considering the ambiguous jurisdiction of the Bureau to conduct market studies, the information obtained during the process might be out of the scope of section 29, which is limited to information legitimately gathered “in the administration or enforcement” of the Competition Act. When participating to a market study, stakeholders must therefore be mindful of the potential use of information provided to the Bureau and take active measures to ensure the protection of commercially sensitive information.