The Commissioner of Competition (“Commissioner”) recently announced that the new advocacy and enforcement efforts of the Competition Bureau (“Bureau”) are a priority with reference to self-regulated professions.
That is not new ground for the Competition Bureau as, indeed, a wide spectrum of professionals and professional bodies have been involved in competition law investigations and proceedings in the past. What is new is the increased scale and scope of the Bureau’s current initiative, which involves an extensive review of the regulation of lawyers, real estate agents, accountants, optometrists, opticians and dental hygienists.
The Commissioner has stated that the principal rationales for the Bureau’s heightened examination of the self-regulated professions are their increasing significance to the economy, the Bureau’s revised approach to the regulated conduct defence and the example of other jurisdictions.
Competition Law and the Professions
Originally, Canada’s competition law did not apply to services. However, since amendments in 1976, the Competition Act (the “Act”) has applied to professionals and services in general. While regulation of professional services may have a variety of legitimate policy objectives, including consumer protection, from an economic perspective, excessive regulation can operate as a barrier to entry and discourage innovation. This may, in turn, lead to higher prices, poorer services and less consumer choice.
Bureau’s Revised Approach to the RCD
The Bureau’s renewed scrutiny of the self-regulated professions is partly based on its revised approach to the regulated conduct defence (“RCD”). The Bureau recently issued a new Technical Bulletin on “Regulated” Conduct (“RCD Bulletin”) that outlines its position on the enforcement of the Act where conduct is regulated by other legislation. The RCD Bulletin replaces its earlier Bulletin that was criticized as insufficiently reflecting existing RCD caselaw.
The RCD is a common law doctrine developed as an exception to the doctrine of federal paramountcy. Under the RCD, where conduct is mandated or authorized by valid provincial or federal legislation, the conduct may be immune from the application of the criminal and, possibly, civil “reviewable matters” provisions of the Act.
A key issue regarding the RCD in relation to self-regulated professions is whether it applies to immunize conduct from the civil provisions of the Act (the majority of RCD cases have involved conduct under the Act’s criminal provisions). The Bureau states that as RCD caselaw is “extremely limited in respect of the reviewable matters provisions,” and, absent further judicial guidance, it “cannot responsibly limit its statutory mandate by the general application of the RCD to the reviewable matters provisions of the Act.” This is a significant policy shift for the Bureau and reflects a willingness to pursue civil cases involving regulated entities.
Another key aspect of the RCD is whether it applies to socalled “regulatees” (those subject to regulation). While the Bureau states that the RCD may be invoked by regulators and regulatees, its view is that the conduct of regulatees may be subject to greater scrutiny given the potential for self-interest.
Restrictions the Bureau is examining in relation to professional services include mandatory or “suggested” fee schedules, as well as restrictions on advertising, entry and type of practice.
Fee regulation can take many forms, including fee tariffs established by regulatory bodies or professional codes of conduct that mandate minimum fees. Some professional bodies have argued that fee regulation is necessary to maintain quality services, provide consumers with information regarding fees for services or prevent overcharging.
However, such restrictions may also raise issues under the criminal conspiracy or price maintenance provisions of the Act.
On the other hand, fee schedules that are something less than an agreement between competing professionals may be permissible. For example, the Bureau recently issued an advisory opinion on the application of the Act to a real estate services fees schedule for Ontario lawyers, concluding that the “recommended” fee schedule, without more, would not provide sufficient grounds for an inquiry.
In theory, advertising is pro-competitive because it informs consumers about different products, allowing them to make informed purchasing decisions. Arguments that have been made for restricting professional advertising have included “information asymmetries” (i.e., restrictions are needed because consumers cannot fully assess information about professional services), and preserving professional integrity and independence. However, advertising restrictions may also reduce competition by increasing the costs of gaining information about different products.
One of the most significant Canadian competition cases involved a prohibition on professional advertising. In a 1982 case, Canada (Attorney General) v. Law Society of British Columbia, provincial legislation authorized Benchers of the Law Society of British Columbia to prohibit lawyers from engaging in “conduct unbecoming” the profession. They used this authority to prohibit lawyers’ advertising. The Supreme Court of Canada held, however, that the regulated conduct defence immunized the Benchers’ activities from the application of the Act’s criminal conspiracy provision.
Entry restrictions may protect consumers by ensuring that professionals are suitably qualified; however, they can also limit competition by reducing the number of service providers and consumer choice. In the trade association context, restricting entry into an association or concerted refusals to provide association services may also raise criminal conspiracy issues.
An example of the Bureau’s recent efforts in this area relates to dental hygienists. The Bureau recently sent letters to the governments of Alberta, Nova Scotia and New Brunswick supporting provincial initiatives to create independent colleges of dental hygiene. The Bureau’s view is that allowing dental hygienists to self-regulate would make the market for dental hygiene services more efficient, allowing more consumers to receive dental hygiene care and improving consumer welfare. The objective of such efforts is to unbundle professional services based on the theory that this will increase choice of professional services and reduce cost.
The Bureau’s recent focus on self-regulated professions highlights the tension between competition and competing policy objectives. Professional bodies and their members may find that they are the subject of increased pressure from the Bureau to remove restrictions on professional services or direct antitrust enforcement. Accordingly, professional bodies may wish to examine the regulation of their members in advance of possible action by the Bureau. However, the extent to which competing policy objectives will ultimately trump the Bureau’s “competition lens,” that sees restrictions on competition as “an extreme regulatory response,” remains to be seen.