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Blood, Sweat, Tears and the Economics of Competition

Fasken
Reading Time 5 minute read

Capital Perspectives - Ottawa Newsletter

John Pecman considers his career path with Canada's Competition Bureau to be "straight out of a fairy tale." With the support of his colleagues, he became the first career staffer and non-lawyer to rise through the ranks of the organization and become Commissioner of Competition in 2013.

"Our work was fast-paced, intellectually stimulating, and extremely important to the economic growth of Canada," he says. "In my view, it doesn't get much better than that."    

An economist by training, John worked in every enforcement branch at the Bureau. He led enforcement actions that preserved competition in various sectors of the Canadian economy, including automotive, manufacturing, e-commerce, telecommunications and retail. His leadership extended to the international competition community, where he served as an executive and liaison for the Organisation for Economic Co-operation and Development (OECD) Competition Committee and the International Competition Network.

After a 34-year career in the public service, many people would look forward to retirement, but not John. At 59, he considered himself "too young to just hang it up." He recently joined the Fasken Ottawa office as Senior Business Advisor, to help Fasken clients better navigate the growing complexity of competition law in Canada and abroad.

Q: In your time with the Bureau, what ranks as the most memorable files with which you were involved?

John: Many a long night, plus lots of blood, sweat and tears are associated with so many of them.

As a senior competition law officer, I would have to say the landmark Superior Propane case. This involved the merger of Canada's two largest propane supply companies, resulting in a monopoly in over a dozen markets across Canada. The merger was challenged by the Bureau before the Competition Tribunal and was found to be anti-competitive. However, the Tribunal ruled that the transaction could proceed on account of Canada's unique efficiency defence. Following two appeals to the Federal Court of Appeal, the Tribunal decision remained.

I was also privileged to lead the Bureau investigation of Canada's largest solid waste disposal company at the time under the abuse of dominance provisions. In this case, where restrictive contracting practices were at issue, the Bureau prevailed before the Tribunal. Another investigation I oversaw involved the use of wire taps to uncover retail gasoline price-fixing agreements in three markets in the province of Quebec, which resulted in 33 individuals and eight companies either pleading or being found guilty.

During my time as Commissioner, we took on a number of digital economy cases that addressed deceptive marketing practices to help bolster consumer confidence in the online marketplace. Examples included our settlement with a major telecom company for its role in encouraging employees to post positive reviews and ratings for certain of its online products. We also successfully investigated and reached settlements with a number of car rental companies for the practice of using hidden fees during the online purchasing process. We subsequently took action against a major online ticket agent for similar practices by filing an application before the Tribunal.

Q: What have been the most significant regulatory changes that have impacted domestic and cross-border M&A activity during your time with the Bureau?

John: The modernization of the Competition Act in 1986, which established civil provisions for merger review and the creation of the specialized quasi-judicial Competition Tribunal which would now adjudicate contested mergers. These amendments also instituted a pre-merger notification regime, including the addition of merger filing fees.

Another major amendment to the Act occurred in 2009, which harmonized our merger review process with the United States by implementing a two-stage process. This also increased the notification threshold and decreased the limitation period on challenges to closed mergers to one year from three.

On the international side, cross-border cooperation between agencies was developed for the review of international mergers, which have increased exponentially since I first joined the Bureau. Through multi-lateral fora such as the International Competition Network, comprised of competition agencies from over 120 jurisdictions world-wide, and through bilateral cooperation agreements, competition authorities coordinate their reviews, and share information regarding enforcement approaches and substantive analyses.

Q: What have you found to be common misconceptions in Canada's corporate sector about the Bureau and its role?

John: I have often heard businesses lament the regulatory cost and interference of the free market from the enforcement of competition law. But the purpose of competition law is to promote and protect innovative and competitive markets which are central to economic growth.

The Competition Bureau does actively advocate for the reduction of regulatory burden on business on the basis that competition and free markets promote the efficient allocation of resources and create strong incentives for innovation and productivity enhancements in the economy.

Q: Where do companies most often run afoul of the law when pursuing a merger or acquisition?

John: To obtain speedy clearance from the Bureau on a complex merger, the parties should identify any problematic issues early in the review process, and cooperate and engage with the Bureau if a Secondary Information Request (SIR) is required.

Should there be efficiency claims arising from the transaction, they too should be made early to avoid delays as they may outweigh any anti-competitive effects of the merger. Trying to pull the wool over the eyes of the Bureau or waiting until the Bureau uncovers concerns through its market contacts will likely result in delays and a possible challenge of the merger.

But most mergers in Canada do not raise any serious competition concerns. Approximately 225 mergers are formally notified with the Bureau each year and about 50 or so are classified as complex, requiring a closer review. Merger remedies are only sought by the Bureau when a merger is found to substantially lessen competition. On average, about 12 transactions a year require remedies to restore competition.

Often, the remedy requires the divestiture of assets in the problematic relevant market, which merging parties usually agree to do. The Bureau rarely seeks to block a merger.

Q: Who is John Pecman when he's not neck deep in competition matters?

John: John Pecman is just a regular guy. My philosophy in life is work hard, play hard, which was instilled in me by my parents.

I am the son of refugee parents from the former Yugoslavia. My father supported our family as a hard rock miner in Northern Ontario. We moved to Niagara Falls when I was young and so I grew up as a Toronto Maple Leaf fan. The 50 years of suffering since the Leafs last won the Cup has certainly taught me patience.

When not working, travelling for work, playing or watching sports, I love to spend time with my wife of 36 years, Susan, our daughter Stephanie, and our two dogs, Magic, a black lab, and Pepper, a dachsy-pin (cross between a dachshund and a miniature Doberman pincher). We travel extensively together and enjoy quality time at our cottage on the Ottawa River.