March 1, 1937

LIB

Norman McLeod Rogers (Minister of Labour)

Liberal

Mr. ROGERS:

My impression is that it was the board of commerce.

Topic:   COMBINES INVESTIGATION ACT
Subtopic:   PROVISION FOR ADMINISTRATION BY COMMISSIONER UNDER MINISTER OF LABOUR
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LIB

Ernest Lapointe (Minister of Justice and Attorney General of Canada)

Liberal

Mr. LAPOINTE (Quebec East):

The board of commerce.

Topic:   COMBINES INVESTIGATION ACT
Subtopic:   PROVISION FOR ADMINISTRATION BY COMMISSIONER UNDER MINISTER OF LABOUR
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LIB

Norman McLeod Rogers (Minister of Labour)

Liberal

Mr. ROGERS:

Under the Combines Investigation Act of 1923 it was planned to have all important investigations conducted by a commissioner especially appointed for the purpose, whose status and powers were much the same as those of a royal commissioner appointed under the inquiries act. At the same time provision was made for preliminary inquiry by the registrar. The office of registrar was created by the legislation of 1923 and his duties were in the nature of those belonging to an executive secretary in connection with the administration of the act. The registrar's powers in the matter of conducting inquiries were the same as those of the ad hoc commissioners and were sufficient to enable him, if called upon, to carry an investigation to its completion. In

the years 1930 to 1935 the practice of conducting inquiries with special commissioners fell into disuse. The previous administration appointed only one commissioner; all the other investigations were conducted by the registrar.

One disadvantage of the latter method, that is, inquiry by the registrar, was that while the act required that the reports of commissioners should be made public, it did not contain the same requirement with respect to reports of the registrar. Consequently, few reports were made public during the period to which I refer. This had the effect of limiting the usefulness of an act which had been designed to attain its purpose, at least in some measure, through the full use of publicity.

There are certain inherent disadvantages in having all extensive inquiries made by special commissioners. If it is necessary to secure a suitable person to act on a temporary basis, there is a distinct possibility of inaction or undue delay occurring in dealing with matters that should be given prompt attention. The experience gained by such temporary investigators is ordinarily not available for use in subsequent inquiries. In the past recourse has been had to certain men in a number of investigations, and some members of the bar of Canada gained considerable experience in conducting inquiries of this kind, but the fact remains that when you do have these investigations conducted by special commissioners you are deprived in a large measure of the advantage which comes from continuity of experience in this particular field of inquiry.

In adopting the principle of utilizing a permanent investigating agency and in deciding upon the appropriate type of such agency, we believe that the advantages point definitely to the single commissioner as proposed in this bill, rather than to the type of commissioner established by the 1935 legislation. It is quite true, as was suggested in the debate on the resolution, that we have not really had an opportunity of testing the utility of the administration of the combines act under the trade and industry commission. In the year and half since the combines act was placed under the Dominion Trade and Industry Commission that commission has not been able to proceed with its work, largely because of the fact that the legislation was before the courts for the determination of its validity. At the same time the Combines Investigation Act has been handicapped in other directions, not merely in connection with its status under the act but

Combines Investigation-Mr. Rogers

because of the disabilities already referred to which were imposed by certain of the 1935 amendments.

The objection I desire to make to the administration of the Combines Act by the tariff board in its capacity as the Dominion Trade and Industry Commission is not directed in any way to the personnel of the tariff board. It is directed rather to the fact that the tariff board has its own proper functions to discharge, and we do not feel that the Combines Act ought to be administered by a board which has other more immediate duties imposed upon it. We believe that the Combines Act should not be relegated to a position of secondary importance. Moreover, the work of the tariff board is such that on occasion it might very well find it embarrassing to have to act in its dual capacity and deal with business firms which have been dealt with in its capacity as a tariff board. There is likely to be an interference with the ordinary work of the tariff board as well as with the adequate enforcement of the Combines Act. For these reasons we are convinced that in the interests of efficiency, not only in the administration of this act but in the working of the tariff board, the combines act should be placed under a single commissioner who can devote his full time to the investigations which may be necessary under the terms of the legislation.

I concede at once that an organization different from that proposed by this bill would be necessary if the legislative program of the government were intended to provide for direct state regulation and control of trade and industry as a substitute for regulation by competition, or if it were to provide for agreements to fix prices and restrict trade with the responsibility placed upon the government to see that fair price levels were maintained. I should like to make it quite clear that it is not the policy of the present government to undertake what appears to us the unwise and impossible task of the direct control of prices, thereby accepting the ultimate responsibility of telling business the quantities and kinds of goods that must be produced and how they shall be distributed. It is its policy in this matter to do its utmost rather to clear the channels of domestic trade, and for this purpose to eliminate artificial price agreements, to restore competitive conditions wherever found necessary for the adequate safeguarding of the interests of the public. This policy with respect to the combines act can be carried out efficiently as well as economically by a single commissioner, with sympathetic government support, and with sufficient facilities to enable him to initiate and complete the necessary investigafMr. Rogers.]

tions, to make full reports of his findings, and concern himself with such further action as may be necessary to carry out the provisions of the act.

I come now to the provision which is made in the bill for the appointment of special commissioners where circumstances require such a course. It is recognized that there may be on occasion a number of applications which would require simultaneous investigation. It has been thought wise, therefore, to provide against undue delay in such case, by making provision whereby special commissioners may be appointed to carry out particular investigations. In the future, moreover, if it should be found desirable to increase the single permanent commissioner by two additional commissioners and to set up what might be termed a separate commission to deal with the Combines Investigation Act, that can be done. For the present, however, we feel it is wise rather to proceed with a single commissioner in order to determine whether or not the work can be done satisfactorily in that way.

A question was raised when the resolution was before the house as to the expense involved in this change, and I believe it was the view of the right hon. leader of the opposition that from the standpoint of expense this was possibly a retrograde step. I examined with some care the debate which took place in this house when the 1935 amendments were under discussion, and while it is quite true that the question of expense was brought forward at that time as one of the reasons for placing the administration of the combines act under the tariff board instead of under a separate commission, it was also pointed out by the then minister of trade and commerce, Mr. Hanson, that provision was made in the Dominion Trade and Industry Commission Act for an increase of personnel and staff if such should be found necessary to deal with the additional duties conferred upon the tariff board in its capacity as the Dominion Trade and Industry Commission. So I do not believe it follows of necessity that any unnecessary expense is involved by transferring the administration of the combines act from the tariff board to the Department of Labour and placing its administration under a single commissioner.

I should like to turn now to certain new definitions which are incorporated in the bill which is before the house. A change is made in the definitions of the words "merger" and "monopoly." In the 1935 legislation, as originally introduced, an improvement was made in giving to these words a definition which made it clear that the act applied to monopolistic concerns as well as to complete monopolies;

Combines Investigation-Mr. Rogers

in other words, to large or dominating concerns which may not come within the category of either complete monopoly or combination. I am sure it will be within the knowledge of all members of this house that one of the characteristic features of recent industrial organization has been the growth of large scale enterprises of the character of monopolies, trusts and mergers. Obviously a concern of that kind may find it possible either to completely dominate a particular market or at any rate to exercise undue control over prices of a particular commodity; but at the same time there may be nothing of the character of a combination in the activities of such a trust *or monopoly. It seemed desirable, therefore, again in the interests of the public, that the legislation should have clearly in view the possibility of a monopoly or of a trust seeking to control production and prices in a manner detrimental to the public interest. Prior to 1935 the act applied to monopolies as well as to combinations, but no definitions of monopoly were provided in the act. Consequently there was some uncertainty as to whether the word applied to anything other than a monopoly, meaning a concern having the exclusive power of dealing in some particular commodity. That is to say, under the previous provision, it seemed to be required of those who sought to bring actions against a monopoly under the act that they should prove that that particular monopoly had an exclusive power. As a matter of fact in our economic life one rarely finds what may be termed a perfect monopoly except in so far as that monopoly has been created by the issue of a Datent or copyright or by the possession of some franchise.

The 1923 act had followed earlier legislation *in attempting, by the use of the words "mergers, trusts and monopolies, so called," to prevent the word from being given too narrow an interpretation and being made applicable only to complete monopolies. Language more nearly exact was necessary, however, in a criminal statute, to indicate the meaning which was clearly intended. In the absence of a definition of monopoly the public might very well have drawn the conclusion that price control by a monopoly did not fall within the provisions of the act, and was entirely lawful. Such a corporation might very well be declared to be outside the scope of the act as being neither a monopoly nor a party to a combination. To meet this situation the price spreads commission of 1935 proposed that the combines act should be amended to include a more comprehensive definition of monopolistic practices and of monopolies themselves. The definition which the former government introduced in its bill to amend the Combines Investigation

Act in 1935 would have implemented the recommendation of the price spreads commission. The definition, however, was not enacted as it was introduced. It was amended in another place, and it was incorporated in the act which finally received royal assent in a form which was quite different from that which was contemplated by the price spreads commission or by the government when the bill was introduced!. In its final form it provided that the word "monopoly" should be made applicable to situations where one or more persons substantially or completely controlled a class or species of business in which he or they were engaged. But this definition, again, was made subject to the following proviso which was introduced by the senate:

This subsection shall not be construed or applied so as to limit or impair any right or interest derived under the Patent Act, 1935, or under any other statute of Canada.

The senate also secured another amendment of the definition of "monopoly" which limited that definition to businesses which dealt in commodities. Thus certain monopolies or monopolistic organizations which had been subject to the provisions of the act when there was no definition of monopoly were given exemption from the act under this new provision. In other words, the definition of monopoly as it was finally incorporated in the act of 1935 appeared specifically to exclude what might be termed monopolies in relation to services as distinct from monopolies in relation to commodities.

Topic:   COMBINES INVESTIGATION ACT
Subtopic:   PROVISION FOR ADMINISTRATION BY COMMISSIONER UNDER MINISTER OF LABOUR
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CON

Charles Hazlitt Cahan

Conservative (1867-1942)

Mr. CAHAN:

Does this act propose an

investigation of patent monopolies?

Topic:   COMBINES INVESTIGATION ACT
Subtopic:   PROVISION FOR ADMINISTRATION BY COMMISSIONER UNDER MINISTER OF LABOUR
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LIB

Norman McLeod Rogers (Minister of Labour)

Liberal

Mr. ROGERS:

An investigation may be

had wherever there is an allegation that a combine or a monopoly is operating to the detriment of the public.

Topic:   COMBINES INVESTIGATION ACT
Subtopic:   PROVISION FOR ADMINISTRATION BY COMMISSIONER UNDER MINISTER OF LABOUR
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CON

Charles Hazlitt Cahan

Conservative (1867-1942)

Mr. CAHAN:

Even under a patent grant?

Topic:   COMBINES INVESTIGATION ACT
Subtopic:   PROVISION FOR ADMINISTRATION BY COMMISSIONER UNDER MINISTER OF LABOUR
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LIB

Norman McLeod Rogers (Minister of Labour)

Liberal

Mr. ROGERS:

I believe I am correct in

that. I shall be glad to look it up before the hill is in committee. But my distinct impression is that patents are not excluded, because as a matter of fact there is a definite provision whereby a patent may be revoked if it is found that the concern which has the patent has been using its powers in a way contrary to the public interest.

Topic:   COMBINES INVESTIGATION ACT
Subtopic:   PROVISION FOR ADMINISTRATION BY COMMISSIONER UNDER MINISTER OF LABOUR
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CON

Charles Hazlitt Cahan

Conservative (1867-1942)

Mr. CAHAN:

I do not wish to discuss it now, but I think the minister should consider whether he is at liberty to do that, first, under the convention, and second, as to whether under the convention there is not an ample procedure for dealing under the convention with that sort of monopoly by the terms of the Patent Act itself.

Combines Investigation-Mr. Rogers

Topic:   COMBINES INVESTIGATION ACT
Subtopic:   PROVISION FOR ADMINISTRATION BY COMMISSIONER UNDER MINISTER OF LABOUR
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LIB

Norman McLeod Rogers (Minister of Labour)

Liberal

Mr. ROGERS:

There is of course a provision in the Patent Act for revocation. I shall be glad to take up that matter, and perhaps it can be brought forward and dealt with further when the bill is in committee.

This exemption to which I referred was authorized in spite of the fact that the price spreads commission had just condemned the unwarranted suppression of new patents as an abuse of a publicly-conferred privilege and had recommended that more effective use should be made of sections of the Combines Act when it appeared that these tariff duties and patents had facilitated the development of monopolies inimical to the public interest. That is the phrase used in the report of the price spreads commission. If any unreasonable advantage is obtained at the expense of the public by any monopoly or quasimonopoly as a result of misuse of privileges accorded to it by the Patent Act or the Customs Tariff or any other statute of Canada, there would seem to be no sound reason why an investigation should not be made into its affairs under the combines act or why the penalties of the act should not apply if the interests of the public have suffered. That after all has been the standard which. has prevailed constantly in the Canadian anticombines legislation. When the anti-trust law known as the Sherman Act was passed in the United States the purpose was rather to condemn a monopoly qua monopoly, to condemn a trust by the mere fact that it was a trust and proved to be such upon evidence being adduced to that effect.

Topic:   COMBINES INVESTIGATION ACT
Subtopic:   PROVISION FOR ADMINISTRATION BY COMMISSIONER UNDER MINISTER OF LABOUR
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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

The contest was in the proof of it.

Topic:   COMBINES INVESTIGATION ACT
Subtopic:   PROVISION FOR ADMINISTRATION BY COMMISSIONER UNDER MINISTER OF LABOUR
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LIB

Norman McLeod Rogers (Minister of Labour)

Liberal

Mr. ROGERS:

The contest was in the proof. But subsequently

I believe I am correct in this-the courts applied a less rigid rule, the rule of reason, so that in effect the anti-trust legislation in the United States tended more and more to conform to that established in Canada. In other words, it was required that there should be some proof that public interest was prejudiced by the existence of the trust or monopoly.

In the present bill the definition of monopoly is intended to cover all commercial monopolies. In other words, the exemptions which were added by the senate amendments of 1935 are excluded in the definition of monopoly which is found in this bill. It will include not only any one or more persons who "substantially control any class or species of business," but also those who "have such control over the supply or distribution of or the demand for products of any class or species of business as to enable such person

or persons to maintain, enhance or substantially modify or control prices of such products." What I have just stated is in terms the definition of monopoly which will be found within the bill which is now before the house. The inclusion of such corporations within the definition of monopoly does not mean that they are thereby condemned under the act. It does mean that they can be subject to investigation under the act when circumstances warrant such investigation. Before they can be convicted of any offence against the act it must be proved that their activities as have been such as to be prejudicial to the public interest. They must be brought within the category of monopoly, and it must -be proved that they have operated or are likely to operate against the interest of the community.

The word "trust" is used in the act as having the same meaning as the word "monopoly." Mergers are separately defined to include all amalgamations of businesses, but only mergers which use their powers to injure the public will be liable to investigation or prosecution under the act. It cannot be made too clear, Mr. Speaker, that the purpose of the present bill is not to prevent or discourage trade combinations, or to condemn large organizations of business merely because of their size. Expansion of business has been a part of the development of recent years in this and other countries. Large scale business enterprises of themselves need not operate to the public detriment. Unquestionably some of them may operate to the public advantage through the economies which are brought about through the large scale operations they conduct. There is nothing in the bill which condemns monoplies, trusts or mergers as such. The purpose rather is to bring this particular type of organization within the scope of the legislation in order that, if a monopoly, trust or merger should be controlling prices to the public detriment, investigations may proceed under the act and penalties may be applied if the offence has been committed. We are anxious rather to prevent abuses of powers than to pillory or to describe as unlawful a particular form of economic organization.

I come now to the question of penalties; and here too, on the basis of the experience of recent years, it is proposed to introduce a change. In the first place there is no intention at all to depart from the use of publicity as a main factor in accomplishing the purposes for which the Combines Investigation Act was designed. I am not sure that publicity should be described precisely as a penalty: it is more of the nature of a

Combines Investigation-Mr. Rogers

remedy than a penalty. Publicity is not always enough. It has to be realized that there will always be some individuals who will not be prevented through fear of publicity from attempting to reap additional rewards in the way of price control which might come to them through a use of their extraordinary powers. These may be individuals who are not greatly deterred by publicity because of their personal viewpoint or the nature of their business, or corporations which owing to the anonymity which often clothes the operations of incorporated companies, or because the companies' responsibilities are shared amongst directors and officers, may be peculiarly insensitive to public opinion. For such companies and individuals penalties must be provided in the form of fines or imprisonment which will serve both as a deterrent and as a suitable punishment. It is felt, in view of the growth of modern business corporations, and particularly the growth of large scale operations, that if the act is to be efficiently enforced there should be an increase in the maximum penalties which may be imposed. It is evident that a penalty of $25,000 might be insufficient in many cases to deter a large corporation from violating the act when in a few weeks or months it might make well over this sum in additional profits by continued operation as a combine. By this bill the maximum penalties which may be imposed by the act are increased from $10,000 to $25,000 in the case of individuals and from $25,000 to $100,000 in the case of corporations. The maximum term of two years' imprisonment is retained, but under the act as amended a court may impose both fine and imprisonment.

I should like to make it clear at this point that these are maximum penalties. Fines may range from a merely nominal amount to $100,000. It will be the duty of the courts, not of the commissioner, to determine the extent of the guilt of each convicted member of any illegal combine, and to determine what penalties are appropriate as a punishment, and sufficient to deter others from operating along similar lines.

This brings me then to another group of amendments, which have to do with the use of evidence in prosecutions. I mentioned at the beginning that at the last session of parliament the government had introduced an amendment touching upon this point, which was rejected by the senate. This bill includes an amendment to a section which was before parliament a year ago. This section relates to the use in criminal proceedings of documents which have been previously received from

witnesses during an investigation under the Combines Investigation Act.

Topic:   COMBINES INVESTIGATION ACT
Subtopic:   PROVISION FOR ADMINISTRATION BY COMMISSIONER UNDER MINISTER OF LABOUR
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CON

Charles Hazlitt Cahan

Conservative (1867-1942)

Mr. CAHAN:

Which section is that?

Topic:   COMBINES INVESTIGATION ACT
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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

Is it No. 37?-I hardly think that is the one the senate dealt with.

Topic:   COMBINES INVESTIGATION ACT
Subtopic:   PROVISION FOR ADMINISTRATION BY COMMISSIONER UNDER MINISTER OF LABOUR
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LIB

Norman McLeod Rogers (Minister of Labour)

Liberal

Mr. ROGERS:

The amendment we sought to make last year was to correct an amendment which had been introduced by the senate in the previous legislation of 1935. Under the senate amendment it was made impossible, as I recall, for a document which had been produced during an investigation under the Combines Investigation Act to be used thereafter in a criminal prosecution founded upon that inquiry. Last year in the amendment introduced by the government we sought to have that corrected, but the senate stood upon its ground, and by what is now proposed we seek once more to have that original defect corrected. In other words we do not believe that documents which are introduced during ar inquiry should, as it were, find sanctuary during the period of inquiry and not be usable thereafter in a criminal prosecution which might be founded upon it.

Topic:   COMBINES INVESTIGATION ACT
Subtopic:   PROVISION FOR ADMINISTRATION BY COMMISSIONER UNDER MINISTER OF LABOUR
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CON

Charles Hazlitt Cahan

Conservative (1867-1942)

Mr. CAHAN:

I was inquiring where that is dealt with in this bill.

Topic:   COMBINES INVESTIGATION ACT
Subtopic:   PROVISION FOR ADMINISTRATION BY COMMISSIONER UNDER MINISTER OF LABOUR
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LIB

Norman McLeod Rogers (Minister of Labour)

Liberal

Mr. ROGERS:

I wonder if that might be left until we are in committee?

Topic:   COMBINES INVESTIGATION ACT
Subtopic:   PROVISION FOR ADMINISTRATION BY COMMISSIONER UNDER MINISTER OF LABOUR
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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

Yes.

Topic:   COMBINES INVESTIGATION ACT
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LIB

Norman McLeod Rogers (Minister of Labour)

Liberal

Mr. ROGERS:

The section relates to the use in criminal proceedings of documents which have been previously received from witnesses during an investigation under the Combines Investigation Act. When the act was passed in 1923 it contained a provision that no oral evidence which a witness was ordered to give in an investigation could be used against that witness in a subsequent criminal proceeding, thus giving a much broader exemption than that contained in section 5 of the Canada Evidence Act with respect to the answers of witnesses. The act of 1923 contained no provision, and none is contained in the Canada Evidence Act, which would prevent documents which a person was required to produce at an investigation from being used against that person in a subsequent trial. The restrictive provision to that effect was inserted in the Combines Investigation Act by an amendment introduced by the senate in 1935.

Topic:   COMBINES INVESTIGATION ACT
Subtopic:   PROVISION FOR ADMINISTRATION BY COMMISSIONER UNDER MINISTER OF LABOUR
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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

What the minister has done is merely to allow the Canada Evidence Act to operate?

Topic:   COMBINES INVESTIGATION ACT
Subtopic:   PROVISION FOR ADMINISTRATION BY COMMISSIONER UNDER MINISTER OF LABOUR
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LIB

Norman McLeod Rogers (Minister of Labour)

Liberal

Mr. ROGERS:

Yes, I think that is it. There is no specific reference to it here. At the session of 1936, as I have already men-

Combines Investigation-Mr. Rogers

tioned, the government introduced a bill to restore this section to its former effect. The senate refused to accept the amendment, and persisted in its refusal. I think one can only assume that the refusal was due to a misunderstanding on the part of members of the other house as to the purpose and effect of the amendment; for it provides no special rule of law that is not applicable to documentary evidence required of witnesses under many other statutes which provide for investigations. It will still be necessary in any prosecution under the Combines Investigation Act to prove documents by the same means as are employed under other statutes, that is, without the obligatory assistance of the accused. The oral testimony which a witness gives in an investigation under this act cannot be used against him in the trial which follows the investigation. Exactly this procedure would be employed in criminal proceedings following an investigation under other statutes, such as the Inquiries Act, the Natural Products Marketing Act, the Tariff Board Act and the various security fraud prevention acts which operate in several provinces. If the legislation were to provide that such documents could not be used merely because they had formed part of the evidence in a previous investigation, counsel conducting a prosecution would find himself unduly and improperly hampered in his work.

Topic:   COMBINES INVESTIGATION ACT
Subtopic:   PROVISION FOR ADMINISTRATION BY COMMISSIONER UNDER MINISTER OF LABOUR
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March 1, 1937