CANADIAN COMPETITION AND ANTITRUST LAW

Sweeping amendments were recently passed that will significantly amend the criminal conspiracy provisions of the federal Competition Act (the “Act”), which are considered one of the “cornerstones” of Canadian competition law. Effective March, 2010, Canada will have a dual-track criminal conspiracy regime with “per se” criminal offence for three forms of “hard core” criminal agreements (i.e., with no requirement to show any adverse market effects on a relevant market(s)) and a second civil reviewable matters provision under which other non-hard core agreements may be subject to review.

This new U.S.-style criminal conspiracy law is meant to make enforcement of hard-core criminal cartel activity easier (by removing the previous competitive effects test) while at the same time allowing non-hard core agreements (e.g., joint venture and other agreements where a more detailed analysis of the potential effects of the agreement may be warranted) to be subject to more detailed scrutiny.

The enforcement of the criminal conspiracy provisions, which can apply to a wide range of commercial agreements and arrangements (e.g., joint venture, franchise, dual distribution and licence agreements), remain a top enforcement priority for the federal Competition Bureau (the “Bureau”). Moreover, in the past fifteen years there have been more than eighty convictions for cartel offences in Canada with total fines of approximately CDN $250 million (though such fines are relatively modest in comparison to other major jurisdictions, notably recent fines in the EU).

Some of the key impacts of the new conspiracy provisions on Canadian and international firms include:

- Substantially increasing the risk associated with “hard core” cartel agreements, as a result of the lower legal burden and higher penalties.
- Altering the review of common commercial agreements (e.g., franchise, licence, dual distribution and joint venture agreements).
- Increasing the importance for trade associations and companies to review existing (or adopt new) competition compliance programs.
- Enhancing the importance of reviewing and controlling dealings with competitors (e.g., information exchanges, etc.).
- Increasing the number of private actions and class actions commenced under the Act (as a result of the lower burden as of next March).

Canada’s new criminal conspiracy regime is discussed in more detail below.

Criminal Offence – Section 45

Under the new criminal conspiracy offence, three categories of agreements will be “per se” criminal offences (i.e., with no requirement to establish any negative effect on a relevant market or markets). All other forms of agreements among competitors will be potentially subject to review under a second and separate non-criminal reviewable matters provision.

Under the new criminal provisions, the following three types of agreements will be per se illegal: (a) agreements to fix, maintain, increase or control the price for the supply of a product (price fixing agreements); (b) agreements to allocate sales, territories, customers or markets for the production or supply of a product (market allocation agreements); and (c) agreements to fix, maintain, control, prevent, lessen or eliminate the production or supply of a product (output agreements). Interestingly, the new criminal conspiracy provisions omits any express reference to group boycotts which, together with bid rigging, has traditionally completed the group of so-called “hard core” anti-competitive forms of agreements both in Canada and internationally (though the language of the new output restriction offence is broad enough to theoretically cover some forms of boycotts).

“Competitor” is defined broadly to include potential competitors (i.e., “a person who it is reasonable to believe would be likely to compete with respect to a product in the absence of a conspiracy, agreement or arrangement”). As such, agreements and arrangements between parties that are not actual competitors may also potentially be caught (e.g., in a franchise arrangement, where a franchisor does not currently but might compete with its franchisees).

It is also worth noting that while the previous conspiracy provisions applied to both vertical and horizontal agreements (e.g., supplier/distributor/consumer and competitor/competitor agreements), the new criminal provisions are restricted to horizontal agreements between competitors (and potential competitors). In this regard, the ambit of the new conspiracy provisions has been narrowed (and it is likely that the majority of allegedly anti-competitive vertical arrangements and agreements will be reviewed under the new civil provision or other reviewable matters provisions, such as the civil abuse of dominance provisions of the Act).

Several of the key impacts of the new conspiracy provisions include a lower burden to establish criminal conspiracies in Canada, an increased risk for parties engaged in “hard core” anti-competitive agreements (e.g., price fixing or market allocation agreements) and altering the framework for the analysis of non-hard core commercial agreements (e.g., franchise, licence, dual distribution and joint venture agreements).

Defences

As a result of the recent amendments, a new ancillary restraints defence has been created. It will apply where it can be proved on a civil burden of proof (i.e., balance of probabilities) that an agreement between competitors is: (i) ancillary to a broader or separate agreement or arrangement between the same parties and (ii) is directly related to (and reasonably necessary to give effect to) the purpose of the broader agreement or arrangement. It will also have to be established that the broader agreement itself, if considered on its own, does not violate the criminal conspiracy provisions. Other pre-existing exceptions, including for agreements between affiliates, will still apply.

In addition, the new civil provision (discussed below) will include an efficiencies defence that will apply where an agreement has resulted in (or is likely to result in) efficiency gains that are greater than, and will offset, the adverse effects of the agreement (i.e., any prevention or lessening of competition that will result or is likely to result from the agreement). In this regard, the new civil provision dealing with non-criminal anti-competitive agreements will be more closely aligned with the existing merger provisions of the Act.

Civil Provision – Section 90.1

Under the newly amended Act, agreements among competitors that are not caught by the three new per se criminal offences will be potentially reviewable under the new civil reviewable matters provision. Such agreements may include, for example, non-compete agreements, research and development agreements, joint purchasing agreements, joint production agreements, joint selling and commercialization agreements and information sharing agreements.

The federal Competition Tribunal (the “Tribunal”) will be able to, on an application by the Commissioner of Competition (the “Commissioner”), make remedial orders where it is established that the agreement prevents or lessens (or is likely to prevent or lessen) competition in a relevant market. The Tribunal may make an order: (i) prohibiting any person (whether or not a party to the agreement) from doing anything under the agreement or (ii) requiring any person, with their consent, to take any other action.

Unlike the criminal conspiracy provisions, the Tribunal will not have the power to impose any monetary penalties (nor will private parties have the power to commence damages actions).

Penalties

Under the new rules, the penalties for contravention of the criminal conspiracy provisions will dramatically increase to up to fourteen years imprisonment (increased from five) and/or a fine of CDN $25 million per count (increased from a previous maximum of CDN $10 million per count).

Advisory Opinions

Before the new conspiracy provisions come into effect, parties to an agreement may apply (for no fee) for an advisory opinion from the Bureau under section 124.1 of the Act as to the applicability of the new provisions to an agreement or arrangement.

CANADIAN COMPETITION LAW LINKS

For more information about Canadian competition law or our competition law services visit our Blog Homepage, Competition Law Services, Canadian Competition Law, Competition Act Amendments, Merger Control, Merger Control FAQs, Abuse of Dominance, Conspiracy, Advertising and Marketing, Promotional Contests, Trade Associations, Refusal to Deal, Investment Canada Act, Canadian Competition Law Compliance, Private Actions, Bid Rigging, Canadian Competition Law Resources, Competition Law Links or Global Competition Law and Policy pages or visit our website at www.NortonStewart.com.

CONTACT US

We provide Canadian competition law services to clients across Canada and internationally. For more information about our Canadian competition law and consulting services contact us at steve@nortonstewart.com, info@competitionlawcanada.com or call us at +1 604 687 0555 or +1 778 867 5558.

DISCLAIMER

The materials and information on CANADIAN COMPETITION LAW are provided as legal information about Canadian competition law. Reading and accessing this information does not create a lawyer-client relationship. The information on our blog does not constitute legal advice or a legal opinion on any issue. In addition, the information and materials on this website will change based on new competition law developments and, as such, may not be current as of the date of access. As such, we take no responsibility for the accuracy or currency of the competition law information or materials on our blog, which should not be relied upon without receiving legal advice from competent legal counsel

Steve Szentesi will be speaking at the upcoming Canadian Bar Association Business Law Subsection Lunch at the Sutton Place Hotel in Vancouver on November 25, 2009. The topic will be Canada’s New Competition Law and will include highlights of the recent Competition Act amendments including the new criminal conspiracy rules, new merger control rules, changes to the abuse of dominance provisions and criminal pricing provisions, increased penalties for false or misleading representations and new Investment Canada Act and national security test for foreign investment.

Significant and sweeping changes were recently made to Canada’s competition laws.

Some of the key changes include:

Criminal conspiracy provisions. New criminal conspiracy provisions have been enacted for price fixing, market allocation and output restriction agreements. Canada has now adopted a “per se” U.S. style criminal conspiracy provision, which means that as of early next year it will not be necessary to show any adverse market effects in order to establish a criminal conspiracy under the Act for “hard-core” cartel agreements (i.e., agreements to allocate markets or customers, fix prices or restrict or limit output/production). The practical impact of this fundamental change is that whereas formerly only large market participants were potentially exposed to criminal liability, small players (i.e., companies with small market shares) now also face potential criminal liability. The recent amendments will also make it easier in theory for private parties to commence damages actions for alleged criminal conduct under the conspiracy provisions of the Act (section 45). Moreover, the recent amendments have resulted in a degree of uncertainty regarding the treatment of many common forms of commercial agreements including franchise, licence and dual distribution agreements.

Criminal conspiracy penalties. Significantly increased penalties under the criminal conspiracy provisions have been enacted, with fines of up to CDN $25 million (per count) and/or imprisonment for up to 14 years, which will come into force in March next year. These penalties are significantly amplified from the former CDN $10 million and five years and signal both the continuing importance to the Bureau of detecting and deterring cartels and what may be a more vigorous enforcement approach following the recent appointment of a new Commissioner of Competition.

Civil provision for anti-competitive agreements. Under the newly amended Act, agreements among competitors that are not caught by the new per se criminal provisions will be potentially reviewable under a new civil section for other types of anti-competitive agreements. Such agreements may include non-compete, research and development, joint purchasing, joint production, joint selling and commercialization agreements. Under this recently enacted provision, which is part of the new “two-track” conspiracy regime (consisting of a per se criminal provision and a civil provision), the federal Competition Tribunal (the “Tribunal”) will have the power, on application by the Commissioner of Competition (the “Commissioner”), to make remedial orders where it is established that the agreement prevents or lessens (or is likely to prevent or lessen) competition in one or more relevant markets. In this regard, the new civil provision for anti-competitive agreements will be brought into alignment with substantive merger review under the Act. Under the new rules, the Tribunal will have the power make orders: (i) prohibiting any person, whether or not a party to the agreement, from doing anything under the agreement or (ii) requiring any person, with consent, to take any other action. Unlike the criminal provisions, however, no monetary penalties can be imposed and no private right of action will be possible.

Private actions. As a result of the recent amendments, and in particular based on the repeal of the “undueness” requirement for criminal conspiracies (i.e., removing the necessity of showing anti-competitive effects), it will now in theory be easier for private plaintiffs and the Bureau to establish the elements of a criminal conspiracy under section 45. This change, together with recent favourable case law to certification proceedings for competition law class actions in Canada, is expected to lead to an increase in competition law based private actions.

Bid rigging. New criminal bid rigging rules have been enacted, which are relevant to companies involved in competitive tenders. These include a new bid rigging offence in addition to the existing offences (for agreements to withdraw a bid that has already been made) and increasing the maximum prison sentence for bid-rigging to fourteen years (increased from the former five years). The previous unlimited fines for bid rigging, which can be set in the discretion of the court, remain unchanged.

Misleading advertising penalties. Significantly increased penalties under the civil misleading advertising provisions have been introduced. These include “administrative monetary penalties” (essentially civil fines) of up to CDN $750,000 for individuals and CDN $10 million for corporations that breach the misleading advertising provisions of the Act.

Merger review and notification. Fundamental changes have been made to Canada’s merger review and notification regime. The key changes include: (i) increasing the “size of transaction” threshold for merger notification, (ii) introducing a U.S. style two-phase merger review and notification process with a single initial waiting period, (iii) introducing a U.S. “second request” style of supplementary information request for complex mergers, (iv) shortening the period during which the Bureau may challenge a completed merger and (v) introducing a single uniform merger notification form. While the law relating to the substantive analysis of mergers has not changed, the new U.S. style two-phase notification and review regime is expected to introduce additional delay and expense for complex mergers in Canada (i.e., those subject to second requests issued by the Bureau). While some aspects of the new merger notification regime remain unclear, the Bureau has recently introduced new guidelines setting out its approach to the new process.

Criminal price maintenance, predatory pricing and price discrimination repealed. The former criminal price maintenance, predatory pricing and price discrimination provisions under the Act have been repealed. These provisions were widely criticized as being unsound in relation to current economic thinking and as well as being overbroad in potentially sanctioning conduct with no adverse market effects. While predatory pricing and price discrimination will now be dealt with under the civil abuse of dominance provisions, the former criminal price maintenance provision has been replaced with a civil section together with a new right of private access allowing private parties to seek Tribunal remedial orders.

Administrative monetary penalties for abuse of dominance. Significant “administrative monetary penalties” have been introduced for the first time for contravention of the civil abuse of dominance provisions under the Act of CDN $10 million (CDN $15 million for subsequent contraventions). The introduction of what are essentially civil fines for abuse of dominance is both controversial and significant – controversial in respect that abuse of dominance is not conduct that is per se illegal, but rather prohibited only when extensive economic analysis shows that a dominant player has abused its dominant position in one or more relevant markets; the change is significant because firms now potentially face significant penalties for aggressive competitive conduct, whereas formerly the most that could be obtained was a Tribunal order to cease the conduct. Among the many potential impacts of this change is that it may have a chilling effect on some forms of perfectly legitimate competitive conduct or alter the analysis in settlement negotiations with the Bureau.

CANADIAN COMPETITION LAW LINKS

For more information about Canadian competition law or our competition law services visit our Blog Homepage, Competition Law Services, Canadian Competition Law, Competition Act Amendments, Merger Control, Merger Control FAQs, Abuse of Dominance, Conspiracy, Advertising and Marketing, Promotional Contests, Trade Associations, Refusal to Deal, Investment Canada Act, Canadian Competition Law Compliance, Private Actions, Bid Rigging, Canadian Competition Law Resources, Competition Law Links or Global Competition Law and Policy pages or visit our website at www.NortonStewart.com.

CONTACT US

We provide Canadian competition law services to clients across Canada and internationally. For more information about our Canadian competition law and consulting services contact us at steve@nortonstewart.com, info@competitionlawcanada.com or call us at +1 604 687 0555 or +1 778 867 5558.

DISCLAIMER

The materials and information on CANADIAN COMPETITION LAW are provided as legal information about Canadian competition law. Reading and accessing this information does not create a lawyer-client relationship. The information on our blog does not constitute legal advice or a legal opinion on any issue. In addition, the information and materials on this website will change based on new competition law developments and, as such, may not be current as of the date of access. As such, we take no responsibility for the accuracy or currency of the competition law information or materials on our blog, which should not be relied upon without receiving legal advice from competent legal counsel

On November 23, 2009 the Competition Bureau announced that Elkhorn Ranch & Resort Ltd., a Manitoba-based company that sells vacation property time shares, has agreed to pay CDN $170,000 for operating promotional contests in contravention of the promotional contest provisions of the Competition Act.

In its News Release, the Bureau stated:

“After conducting an investigation into Elkhorn’s 2006 and 2007 promotional contests, the Bureau concluded that the company had run contests without fair disclosure of accurate odds of winning and without ensuring that winners were selected on a random basis. Elkhorn’s contests also gave the misleading impression that the grand prize was a brand new SUV, when the prize, if awarded, was a one or two–year lease on an SUV, with stringent conditions. The contests were primarily associated with the marketing of Elkhorn’s time share properties in Western Canada. Consumers were solicited by phone, at trade shows and at time share presentations.”

As part of its settlement with the Bureau (under a consent agreement), Elkhorn is required to: (i) pay an administrative monetary penalty of $150,000, (ii) pay costs of the Bureau’s investigation in the amount of $20,000, (iii) ensure that all of its future contests are conducted fairly and with full disclosure, (iv) publish corrective notices in select newspapers and on its websites and (v) adopt a corporate compliance program to ensure compliance with the deceptive marketing sections of the Competition Act.

In addition to general misleading advertising provisions, the Competition Act also contains a number of other provisions that regulate a range of marketing activities including bait and switch selling, selling above advertised price, multi-level marketing plans, pyramid selling schemes, deceptive telemarketing and the “ordinary selling price” provisions (dealing with sales) and promotional contests.

The promotional contest provisions of the Act, among other things, require that persons conducting promotional contests disclose the number and approximate value of prizes, the areas to which they relate and chances of winning. In addition, the Criminal Code also contains provisions regulating promotional contests. As such, review of promotional contests should include ensuring that rules comply with the Competition Act and Criminal Code.

While enforcement of the promotional contest rules under the Act is relatively uncommon, the Bureau does commence investigations for breaches of these rules from time to time and this most recent case is a sober reminder of the potential penalties for being offside the rules. It is also worth noting that, as a result of recent amendments, the penalties for contravention of the civil false or misleading representation provisions of the Act have now been increased to $750,000 (for individuals) and $10 million (for corporations).

CANADIAN COMPETITION LAW LINKS

For more information about Canadian competition law or our competition law services visit our Blog Homepage, Competition Law Services, Canadian Competition Law, Competition Act Amendments, Merger Control, Merger Control FAQs, Abuse of Dominance, Conspiracy, Advertising and Marketing, Promotional Contests, Trade Associations, Refusal to Deal, Investment Canada Act, Canadian Competition Law Compliance, Private Actions, Bid Rigging, Canadian Competition Law Resources, Competition Law Links or Global Competition Law and Policy pages or visit our website at www.NortonStewart.com.

CONTACT US

We provide Canadian competition law services to clients across Canada and internationally. For more information about our Canadian competition law and consulting services contact us at steve@nortonstewart.com, info@competitionlawcanada.com or call us at +1 604 687 0555 or +1 778 867 5558.

DISCLAIMER

The materials and information on CANADIAN COMPETITION LAW are provided as legal information about Canadian competition law. Reading and accessing this information does not create a lawyer-client relationship. The information on our blog does not constitute legal advice or a legal opinion on any issue. In addition, the information and materials on this website will change based on new competition law developments and, as such, may not be current as of the date of access. As such, we take no responsibility for the accuracy or currency of the competition law information or materials on our blog, which should not be relied upon without receiving legal advice from competent legal counsel

OVERVIEW

Significant changes have recently been made to the federal Competition Act (the “Act”) that impact competition law private actions under the Act. At the same time, there appears to be an increasing number of private and class actions currently being commenced in Canada. This trend may well continue as a result of some of the recent amendments, as well as several plaintiff favourable competition law class actions in British Columbia and Ontario.

PRIVATE ACTIONS

Generally speaking, parties may commence private actions under the Act for contraventions of either the criminal provisions of the Act or a breach of a court or Competition Tribunal (“Tribunal”) order made under the Act. Private competition law actions in Canada have typically been commenced in the context of (i) consumers alleging damages as a result of a conspiracy between suppliers (e.g., a price fixing conspiracy relating to a product or key input), (ii) consumers alleging damages as a result of misleading advertising claims (e.g., false or misleading claims in relation to a product, investment or other business opportunity, etc.) or (iii) competitors alleging damages based on misleading claims made by a competitor or alleged conspiracy entered into among other competitors.

Process

Section 36 of the Act creates a statutory cause of action for private parties seeking to commence a private action under the Act. Section 36 provides that any person that has suffered loss or damage as a result of conduct that is contrary Part VI (the criminal provisions of the Act, which include the criminal conspiracy and criminal misleading advertising provisions), or failure to comply with a Tribunal or court order under the Act, may commence a private damages action.

Private actions may be commenced for contravention of the criminal conspiracy (e.g., price fixing agreements), bid-rigging or criminal false or misleading representations provisions. Private parties do not, however, have a right to commence private actions for breaches of the civil “reviewable matters” provisions of the Act, which include the merger, abuse of dominance, price maintenance and civil misleading advertising sections.

In the past, the majority of competition law private actions have been commenced for alleged breaches of the criminal conspiracy or criminal misleading advertising provisions (e.g., in relation to alleged price fixing conspiracies, misleading representations in relation to the sale of products or claims in relation to business opportunities). It has been relatively uncommon for private plaintiffs to commence proceedings under other criminal provisions (although there have been some cases – for example, one case brought for alleged predatory pricing which was, until recently, a criminal offence).

With respect to private actions commenced under the conspiracy provisions of the Act, private action activity may increase following the coming into force of new U.S.-style “per se” criminal cartel rules in March, 2010.

This is because, whereas formerly private plaintiffs, as well as the Competition Bureau (the “Bureau”), were required to establish anti-competitive effects as a key element of a conspiracy offence (i.e., that the alleged illegal conduct prevented or lessened competition “unduly” in one or more relevant markets), this competitive effects test has now been removed from three forms of “hard core” criminal cartel offences as follows: price fixing, market allocation and output restriction agreements. The key impact of this amendment is that both private plaintiffs and the Bureau will have a lower burden to establish these three forms of “hard core” criminal cartel conduct.

Moreover, the fact that both the former and impending new cartel rules can have a bearing on many forms of common commercial agreements (e.g., joint venture, franchise, dual distribution and licence agreements, among others), it remains to be seen how the Bureau, private parties as well as Canadian courts treat the application of the new cartel rules on commercial agreements and arrangements in Canada. In this regard, while the Bureau has issued new enforcement guidelines in relation to dealings between competitors, and which address some of the commercial contract issues associated with the new cartel rules, the Bureau’s guidelines are not law and are not binding on either the courts or private parties seeking remedies under the Act.

Jurisdiction

Under the Act, private action proceedings may be commenced in provincial superior courts or the Federal Court. However, as the Federal Court has limited jurisdiction, plaintiffs that wish to rely on causes of action in addition to those under the Act – for example, common law causes of action – must commence their proceedings in provincial superior court.

With respect to asserting jurisdiction in relation to cross-border cases, Canadian courts have generally relied on the “real and substantial connection test” to determine whether a court has jurisdiction in the private action context. The jurisdiction of Canadian courts to hear private actions under the Act is particularly relevant in the context of international price fixing conspiracies, where the agreement may have been formed outside Canada with potential anti-competitive effects in Canada. There is now, however, authority for the proposition that where a conspiracy is formed abroad, with anti-competitive effects in Canada, a Canadian court will have jurisdiction.

Test

To establish a private action claim under section 36 of the Act, a private plaintiff must establish that the defendant contravened one of the criminal provisions of the Act (e.g., establish all of the elements of a criminal price fixing conspiracy) or breached a Tribunal or court order under the Act and that it has suffered actual damage or loss as a result of the conduct. In other words, a private plaintiff must establish both the elements of the alleged criminal offence and that it has suffered actual loss or damage as a result of the conduct (and that the damage or loss was caused by the defendant). Moreover, the absence of a prior criminal conviction does not act as a bar to parties commencing private actions.

The necessity under section 36 for private plaintiffs to establish actual damage may, in many cases, mean that it is easier for downstream purchasers (as compared to a direct competitor) to establish and quantify damages (e.g., consumers paying an overcharge as a result of a price fixing conspiracy engaged in by suppliers, based on misleading claims made by a supplier in relation to a product that does not work, etc.).

Rebuttable Presumption

Section 36, which is the provision under which private actions under the Act are commenced, also contains a helpful rebuttable presumption for plaintiffs. It provides that the “record of proceedings” in a matter that results in the conviction for a criminal offence under the Act (or a failure to comply with a Tribunal order) is “prima facie” evidence of the alleged conduct in a civil action. The impact of this presumption is that unless sufficient evidence is adduced to the contrary, a guilty finding in a criminal proceeding, and likely pleadings and agreed statements of fact where a defendant is convicted or has plead guilty, can lead to potential civil liability in subsequent civil proceedings.

Burden

It has been held that the elements of a private action claim under the Act must be established on a higher burden than the normal civil burden of proof (i.e., on balance of probabilities), as a private action is based on an alleged breach of a criminal provision of the Act.

Class Actions

It is also possible to commence class actions under the Act. For example, competition law class actions can be commenced in British Columbia under the British Columbia Class Proceedings Act and Ontario under the Ontario Class Proceedings Act. To date, Ontario, Quebec, British Columbia, Alberta, New Brunswick, Saskatchewan, Manitoba and Newfoundland have adopted class action legislation.

The introduction of class action legislation has led to a relative increase in competition law private actions in Canada, largely as a result of consolidating the considerable expenses of commencing competition law private actions.

In order to commence a competition law class action a representative plaintiff must as a first step obtain leave (“certification”) to commence the action as a class action after which, if certification is granted, the action will proceed on its merits.

The test for certification of a class action in most provinces is as follows: (a) the pleadings of notice of application disclose a cause of action, (b) there is an identifiable class of two or more persons, (c) the claim of the class members raises common issues, (d) a class proceeding is the preferable procedure for the resolution of the common issues and (e) there is a representative plaintiff that: (i) would fairly and adequately represent the class, (ii) has produced a workable plan for advancing the proceedings on behalf of the class and of notifying class members of the proceeding and (iii) with respect to the common issues, does not have interests that may conflict with other members of the class.

One of the primary issues relating to the certification of competition law class actions to date has been difficulties arising from the calculation of damages and, in particular, the challenges in some cases of calculating damages in the context of indirect purchasers (i.e., where it is alleged that that direct purchasers passed on, for example, a price-fixing overcharge to a second downstream level of consumers). As a result, much of the contested activity in relation to Canadian competition law class actions has been at the certification stage of proceedings. The recent British Columbia Court of Appeal DRAMS case is an excellent recent example.

However, as a result of several recent plaintiff favourable class action certification cases in British Columbia and Ontario, it is expected that class activity in Canada will increase. In particular, the British Columbia Court of Appeal in the DRAMS case recently took a highly flexible (and plaintiff favourable) approach to the certification of competition law private actions in British Columbia, which closely followed another plaintiff favourable certification case in Ontario (Irving Paper).

Limitation Period

The limitation period during which plaintiffs must commence a private action under the Act is two years from the later of: (a) the day on which the relevant anti-competitive conduct was engaged in (or court or Tribunal order was contravened) or (b) the day when any criminal proceedings were “finally disposed of”.

Remedies

Under section 36 of the Act, the potential remedies for a successful competition law private action are the actual damages proven as a result of the criminal violation (or breach of a Tribunal or court order) and “any additional amount that the court may allow” which cannot exceed the cost of any proceeding and investigation. In contrast to the United States, only single damages, as opposed to treble damages, are available to successful plaintiffs in Canada (though as a practical matter the majority of private actions in Canada have resulted in settlements). Moreover, there is some authority in Canada that punitive or exemplary damages are not available.

As a result of the potential remedy limitations under the Act, it is common for private plaintiffs to argue common law causes of actions together with claims under the Act (e.g., common law conspiracy, unjust enrichment, unlawful interference with economic relations, etc.).

CONCLUSION

This is a very interesting time for competition law private actions, class actions and private access cases in Canada based on the recent sweeping amendments to the Act and recent plaintiff favourable class action cases in British Columbia and Ontario.

Some of the potential key impacts of the recent developments include:

- An increase in the number of competition law private actions commenced following the March, 2010 implementation of the new criminal conspiracy rules.
- An increase in the number of competition law class actions commenced following the recent British Columbia and Ontario class action certification cases.
- Increased compliance costs for firms to review their policies and comply with the new rules.
- Possible increased strategic litigation.

CANADIAN COMPETITION LAW LINKS

For more information about Canadian competition law or our competition law services visit our Blog Homepage, Competition Law Services, Canadian Competition Law, Competition Act Amendments, Merger Control, Merger Control FAQs, Abuse of Dominance, Conspiracy, Advertising and Marketing, Promotional Contests, Trade Associations, Refusal to Deal, Investment Canada Act, Canadian Competition Law Compliance, Private Actions, Bid Rigging, Canadian Competition Law Resources, Competition Law Links or Global Competition Law and Policy pages or visit our website at www.NortonStewart.com.

CONTACT US

We provide Canadian competition law services to clients across Canada and internationally. For more information about our Canadian competition law and consulting services contact us at steve@nortonstewart.com, info@competitionlawcanada.com or call us at +1 604 687 0555 or +1 778 867 5558.

DISCLAIMER

The materials and information on CANADIAN COMPETITION LAW are provided as legal information about Canadian competition law. Reading and accessing this information does not create a lawyer-client relationship. The information on our blog does not constitute legal advice or a legal opinion on any issue. In addition, the information and materials on this website will change based on new competition law developments and, as such, may not be current as of the date of access. As such, we take no responsibility for the accuracy or currency of the competition law information or materials on our blog, which should not be relied upon without receiving legal advice from competent legal counsel

Private parties have a limited right of “private access” under the Competition Act (the “Act”) to the Competition Tribunal (the “Tribunal”) to seek Tribunal orders for breach of certain reviewable matters provisions of the Act. Private access rights were introduced in 2002 to allow small and medium sized firms to challenge allegedly harmful conduct to their businesses under provisions which have not historically been enforcement priorities for the Competition Bureau (e.g., the refusal to deal provisions).

Since the private access provisions were introduced, approximately eleven leave applications have been commenced. The majority of the private access applications to date have been under the refusal to deal provision of the Act (i.e., by distributors seeking a Tribunal order for resupply of products from suppliers).

Competent Court

Private access proceedings, unlike private civil actions under the Act (which may be brought in the Federal Court or provincial courts), are brought in front of the Tribunal.

Commencing a Private Access Application

Private access to the Tribunal is available to private parties, with leave, under the refusal to deal, exclusive dealing, tied selling and market restriction provisions and, as a result of recent amendments earlier this year, under the price maintenance provisions of the Act as well. To date, however, the majority of the private access applications have been commenced under the the refusal to deal provisions of the Act in relation to terminations of supply (i.e., distributors seeking re-supply for terminated supply, which can be an alternative remedy in addition to contractual remedies).

Leave Requirement

Private parties are required to obtain leave in order to make private access applications to the Tribunal. In addition, in order to prevent strategic litigation, damages are not available and costs may only be awarded in the discretion of the Tribunal.

To grant leave in a private access application, the Tribunal must have “reason to believe that the applicant is directly and substantially affected by any practice [under sections 75, 76 or 77] that could be subject to a [Tribunal order]”. With respect to evidence, the Tribunal has held that a leave application must be “supported by sufficient credible evidence to give rise to a bona fide belief that the applicant may have been directly and substantially affected in the applicant’s business by a reviewable practice, and that the practice in question could be subject to a [Tribunal] order”.

Where leave is granted, the Commissioner of Competition may also intervene in the proceedings.

Burden

The burden of proof on a private access leave application is a lower burden than the civil balance of probabilities (i.e., an private access applicant need only establish sufficient credible evdience of of the alleged conduct to lead to a bona fide belief by the Tribunal). An affidavit filed in support of a private access leave application must contain facts that are relevant to each of the statutory elements of the alleged reviewable practice (i.e., refusal to deal, exclusive dealing, price maintenance, etc.), though the Tribunal may address each element summarily.

Limitation Period

Applications for leave under the private access provisions of the Act must be brought within one year following the end of the conduct.

Remedies

Under the private access provisions of the Act, the available remedy is a Tribunal remedial order (e.g., for a supplier to commence supply on “usual trade terms” in the case of a refusal to deal). Private parties are not entitled to seek damages and costs may only be awarded in the discretion of the Tribunal. In addition, private parties that have been granted leave from the Tribunal to commence private access applications may also file consent agreements with the Tribunal. Once filed with the Tribunal, consent agreements have the force of a Tribunal order.

With expected increase in private actions under the Act as a result of the recent sweeping amendments to the Act, it will be interesting to see whether there is also a corresponding increase in private access applications as well by private parties seeking Tribunal remedies under the Act. It will as well be interesting to see whether private access applications will be brought under the newly enacted civil price maintenance provisions which, among other things, prohibit refusals to supply or discriminatory conduct based on low pricing policies, where such conduct had an adverse effect on competition.

CANADIAN COMPETITION LAW LINKS

For more information about Canadian competition law or our competition law services visit our Blog Homepage, Competition Law Services, Canadian Competition Law, Competition Act Amendments, Merger Control, Merger Control FAQs, Abuse of Dominance, Conspiracy, Advertising and Marketing, Promotional Contests, Trade Associations, Refusal to Deal, Investment Canada Act, Canadian Competition Law Compliance, Private Actions, Bid Rigging, Canadian Competition Law Resources, Competition Law Links or Global Competition Law and Policy pages or visit our website at www.NortonStewart.com.

CONTACT US

We provide Canadian competition law services to clients across Canada and internationally. For more information about our Canadian competition law and consulting services contact us at steve@nortonstewart.com, info@competitionlawcanada.com or call us at +1 604 687 0555 or +1 778 867 5558.

DISCLAIMER

The materials and information on CANADIAN COMPETITION LAW are provided as legal information about Canadian competition law. Reading and accessing this information does not create a lawyer-client relationship. The information on our blog does not constitute legal advice or a legal opinion on any issue. In addition, the information and materials on this website will change based on new competition law developments and, as such, may not be current as of the date of access. As such, we take no responsibility for the accuracy or currency of the competition law information or materials on our blog, which should not be relied upon without receiving legal advice from competent legal counsel

The Globe and Mail reported earlier today that Telus Communications has commenced an action against Rogers Communications in British Columbia for alleged misleading advertising in relation to its network.

In our comments to the Globe and Mail we noted that this case was interesting for several reasons including the potential challenge for Telus to show actual damage as a result of Rogers’ alleged misleading claims (a necessary element of establishing a private misleading advertising action), as well as a misleading advertising private action involving major Canadian telcoms and direct competitors (as compared to the more common actions between suppliers and customers, suppliers and distributors, etc.). With respect to Telus’ burden to show damages, the challenging aspect (assuming Telus intends to pursue the case) would be to show actual damages in the relatively short period between the launch of its new (allegedly faster) network and the present, a relatively short period of some three weeks.

Telus claims that claims made by Rogers in its advertising claiming that it provides “Canada’s Fastest Network: 2x Faster than Any Other” (and similar variations) are false and misleading under the Competition Act, as Telus’ recently introduced new network is now faster than Rogers. Whereas Rogers introduced its High Speed Packet Access in 2007, Telus launched its new HSPA/HSPA+ wireless network earlier this month.

Telus is also alleging that Rogers advertising claims that it provides “Canada’s Most Reliable Network” (and similar variations) are also false and misleading.

Perhaps the most interesting aspect of this recently filed case are Telus’ arguments regarding alleged damages suffered as a result of Rogers’ advertising claims:

“The pre-Christmas months are the busiest time of the year for consumer sales in the wireless service communications market. Due to the economic slowdown in Canada, this year the competition for wireless service communications customers will be even more competitive than normal. … Further, given the economic downturn in Canada, consumers are becoming more price conscious and, as such, the false and misleading Fastest Network Representation and the false and misleading Most Reliable Network Representation are particularly damaging to TELUS. … As a result of Rogers’ wrongful acts and omissions as set forth herein, the Plaintiff has suffered, and will continue to suffer, loss, damage and expense, including depreciation of its’ goodwill and competitive advantage …”

While private actions under the Competition Act are now not uncommon (most are commenced under the criminal conspiracy or criminal misleading advertising provisions of the Act), it is relatively uncommon for a direct competitor to commence a private action against a competitor, given that actual damage as a result of the alleged illegal conduct must be shown. As such, many private actions commenced under the Act are in the context of vertical arrangements (e.g., supplier/customer, supplier/distributor, etc.) – for example, consumers commencing actions (or class actions) for criminal price fixing agreements or misleading advertising engaged in by upstream suppliers, where it is, generally speaking, easier to quantify damages.

This most recent case also follows a relative upswing in the number of private actions commenced under the Competition Act, a trend which is expected to continue as a result of recent amendments to the conspiracy provisions of the Act (lowering the bar for price-fixing private actions) and several recent plaintiff favourable class action certification cases in British Columbia and Ontario.

OUR MISLEADING ADVERTISING & MARKETING LAW SERVICES

We practice federal competition law, have provided competition law and compliance advice to clients across Canada and internationally and provide a full range of competition law services in relation to the criminal conspiracy, merger, abuse of dominance, misleading advertising and deceptive marketing provisions of the federal Competition Act. Our misleading advertising and marketing law services include advice in relation to:

- The general misleading advertising provisions of the Competition Act.
- “Ordinary selling price” provisions (sales).
- Promotional contests.
- Multi-level marketing plans.
- Pyramid selling.
- Telemarketing.
- Deceptive prize notices.
- Double ticketing & bait and switch advertising.
- Performance claims & comparative advertising.
- Scope of the recent Competition Act amendments.
- Consumer packaging and labeling legislation.

CANADIAN COMPETITION LAW LINKS

For more information about Canadian competition law or our competition law services visit our Blog Homepage, Competition Law Services, Canadian Competition Law, Competition Act Amendments, Merger Control, Merger Control FAQs, Abuse of Dominance, Conspiracy, Advertising and Marketing, Promotional Contests, Trade Associations, Refusal to Deal, Investment Canada Act, Canadian Competition Law Compliance, Private Actions, Bid Rigging or Global Competition Law and Policy pages or visit our website at www.NortonStewart.com.

CONTACT US

We provide Canadian competition law services to Canadian and international clients. For more information about our Canadian competition law and consulting services contact us at steve@nortonstewart.com, info@competitionlawcanada.com or call us on +1 604 687 0555 or +1 778 867 5558.

The Competition Bureau has announced that a national phone card supplier has been required to pay refunds and a penalty of Cdn. $300,000.

Ontario-based Phonetime Inc. will offer refunds to consumer that bought Bravo! and Bravo! Atlantic prepaid long-distance phone cards.

According to the federal Competition Bureau, this settlement followed a Bureau investigation into misleading representations relating to Phonetime’s advertising of pre-paid long-distance phone cards, including hidden fees and and per-minute rates (as well as fewer minutes than advertised).

The Bureau stated in its News Release:

“This is the second case involving prepaid long-distance telephone calling cards that the Competition Bureau has investigated and resolved,” said Andrea Rosen, Deputy Commissioner of Competition, Fair Business Practices Branch. “The Bureau has clearly communicated its concerns to the phone card industry and any company found to be misleading consumers could become the target of an investigation.”

This case shows that misleading advertising and deceptive marketing practices, together with criminal cartels, remain enforcement priorities for the Bureau.

OUR MISLEADING ADVERTISING & MARKETING LAW SERVICES

We practice federal competition law, have provided competition law and compliance advice to clients across Canada and internationally and provide a full range of competition law services in relation to the criminal conspiracy, merger, abuse of dominance, misleading advertising and deceptive marketing provisions of the federal Competition Act. Our misleading advertising and marketing law services include advice in relation to:

- The general misleading advertising provisions of the Competition Act.
- “Ordinary selling price” provisions (sales).
- Promotional contests.
- Multi-level marketing plans.
- Pyramid selling.
- Telemarketing.
- Deceptive prize notices.
- Double ticketing & bait and switch advertising.
- Performance claims & comparative advertising.
- Scope of the recent Competition Act amendments.
- Consumer packaging and labeling legislation.

CANADIAN COMPETITION LAW LINKS

For more information about Canadian competition law or our competition law services visit our Blog Homepage, Competition Law Services, Canadian Competition Law, Competition Act Amendments, Merger Control, Merger Control FAQs, Abuse of Dominance, Conspiracy, Advertising and Marketing, Promotional Contests, Trade Associations, Refusal to Deal, Investment Canada Act, Canadian Competition Law Compliance, Private Actions, Bid Rigging or Global Competition Law and Policy pages or visit our website at www.NortonStewart.com.

CONTACT US

We provide Canadian competition law services to Canadian and international clients. For more information about our Canadian competition law and consulting services contact us at steve@nortonstewart.com, info@competitionlawcanada.com or call us on +1 604 687 0555 or +1 778 867 5558.

The Financial Post has reported that the British Columbia Court of Appeal has approved the DRAM memory class action. The Court of Appeal has reversed a lower court ruling certifying a class action against a group of five technology manufacturers accused of fixing their prices for computer memory chips.

In this case (Pro-Sys Consultants Ltd. v. Infineon Technologies AG) the Court held that the British Columbia Class Proceedings Act should be “construed generously in order to achieve its objectives” (for example, to improve access to justice and avoid duplication in legal proceedings).

This latest case is the most recent in a number of price-fixing class actions commenced under the Competition Act including a recent plaintiff-favourable Ontario indirect purchaser certification judgment relating to hydrogen peroxide.

In this case, the respondent computer firms include Infineon, Hynix Semiconductor Inc., Samsung Electronics Co. Ltd., Micron Technology Inc. And Elpida Memory, Inc. Together, these firms represesent approximately 76% of the global production of “dynamic random access memory” (DRAM) that provides electronic memory and information retrieval for computer and telecommunications products. Three of the respondents have settled U.S. class action proceedings for USD $160 million. All of the respondents (except Micron) have pleaded guilty to criminal cartel charges in the U.S. and have paid fines totaling about USD 731 million. In addition, several executives of the companies have either paid fines or served prison terms.

With the recent sweeping changes to Canada’s Competition Act this past spring, private action activity (including class actions commenced under the Competition Act) is expected to increase. Key changes to the criminal conspiracy provisions of Canada’s competition legislation include increasing the penalties for criminal conspiracies to fourteen years imprisonment and/or criminal fines up to CDN $25 million (up from five years and CDN $10 million) and introducing new U.S.-style “per se” criminal conspiracy offences for price fixing, market allocation and output restriction agreements (with no competitive effects test or adverse market effects required).

CANADIAN COMPETITION LAW LINKS

For more information about Canadian competition law or our competition law services visit our Blog Homepage, Competition Law Services, Canadian Competition Law, Competition Act Amendments, Merger Control, Merger Control FAQs, Abuse of Dominance, Conspiracy, Advertising and Marketing, Promotional Contests, Trade Associations, Refusal to Deal, Investment Canada Act, Canadian Competition Law Compliance, Private Actions, Bid Rigging, Canadian Competition Law Resources, Competition Law Links or Global Competition Law and Policy pages or visit our website at www.NortonStewart.com.

CONTACT US

We provide Canadian competition law services to clients across Canada and internationally. For more information about our Canadian competition law and consulting services contact us at steve@nortonstewart.com, info@competitionlawcanada.com or call us at +1 604 687 0555 or +1 778 867 5558.

DISCLAIMER

The materials and information on CANADIAN COMPETITION LAW are provided as legal information about Canadian competition law. Reading and accessing this information does not create a lawyer-client relationship. The information on our blog does not constitute legal advice or a legal opinion on any issue. In addition, the information and materials on this website will change based on new competition law developments and, as such, may not be current as of the date of access. As such, we take no responsibility for the accuracy or currency of the competition law information or materials on our blog, which should not be relied upon without receiving legal advice from competent legal counsel

Earlier this year one of the largest economies in the world officially introduced its competition law.

Last week we attended and spoke at the International Conference on Competition Law in Delhi jointly organized by the World Council for Corporate Governance and International Academy of Law. This landmark two day conference was attended by Indian law firms, academics, economists, jurists and antitrust enforcement officials from many jurisdictions including the U.K. (Reed Smith, Addleshaw Goddard), EU (European Commission, ESSEC Business School), India (Indian government officials, Competition Commission of India, Nestle India, Hindustan Coca-Cola, CBDT, TATA, Dhall Law Chambers, Khaitan & Co., Luthra & Luthra, Trilegal, J. Sagar Associates, Amarchand Mangaldas, Vishwanathan & Co., Hummurabi & Solomon, Saikrishna Associates, Fidus Law Chambers), Pakistan (Competition Commission of Pakistan, Surrindge & Beecheno), Singapore (Allen & Gledhill, Rajah & Tann, National University of Singapore, Competition Commission of Singapore), Hong Kong (Linklaters), United States (Clifford Chance, Weil Gotshal & Manges), Australia, Canada and Turkey (Istanbul Bilgi University).

Given that 100+ jurisdictions have now adopted competition laws, and an increasing level of dialogue and interchange regarding the adoption, interpretation and enforcement of competition law, this conference in one of the largest and fastest growing global economies provided an excellent opportunity for academic and practical debate and interchange. At the moment India’s cartel and abuse of dominance provisions are in force, with debate as to the timing for the introduction of merger control rules.

CANADIAN COMPETITION LAW LINKS

For more information about Canadian competition law or our competition law services visit our Blog Homepage, Competition Law Services, Canadian Competition Law, Competition Act Amendments, Merger Control, Merger Control FAQs, Abuse of Dominance, Conspiracy, Advertising and Marketing, Promotional Contests, Trade Associations, Refusal to Deal, Investment Canada Act, Canadian Competition Law Compliance, Private Actions, Bid Rigging, Canadian Competition Law Resources, Competition Law Links or Global Competition Law and Policy pages or visit our website at www.NortonStewart.com.

CONTACT US

We provide Canadian competition law services to clients across Canada and internationally. For more information about our Canadian competition law and consulting services contact us at steve@nortonstewart.com, info@competitionlawcanada.com or call us at +1 604 687 0555 or +1 778 867 5558.

DISCLAIMER

The materials and information on CANADIAN COMPETITION LAW are provided as legal information about Canadian competition law. Reading and accessing this information does not create a lawyer-client relationship. The information on our blog does not constitute legal advice or a legal opinion on any issue. In addition, the information and materials on this website will change based on new competition law developments and, as such, may not be current as of the date of access. As such, we take no responsibility for the accuracy or currency of the competition law information or materials on our blog, which should not be relied upon without receiving legal advice from competent legal counsel

Meet the Enforcers: The Canadian Competition Bureau

November 17, 2009 at 12:30 p.m. Eastern Dial-in teleconference program presented by the Criminal Matters Committee (CBA Competition Law Section) and International Antitrust Committees (ABA Sections of Antitrust Law and International Law). Speakers include heads of the Competition Bureau’s key enforcement branches, who will be joined by an international panel of antitrust experts as they address what to expect under Canada’s new competition regime. For more information and registration details visit: CBA: National Competition Law Section.

Demystifying Market Definition: A Primer on the Economic Concepts

Thursday, November 19, 2009 from 12:00 – 1:30 p.m. Eastern This session on fundamental economic concepts relevant in defining markets is presented by the Young Lawyers Committee of the CBA Competition Law Section. For more information and registration details visit: CBA: National Competition Law Section.

CANADIAN COMPETITION LAW LINKS

For more information about Canadian competition law or our competition law services visit our Blog Homepage, Competition Law Services, Canadian Competition Law, Competition Act Amendments, Merger Control, Merger Control FAQs, Abuse of Dominance, Conspiracy, Advertising and Marketing, Promotional Contests, Trade Associations, Refusal to Deal, Investment Canada Act, Canadian Competition Law Compliance, Private Actions, Bid Rigging, Canadian Competition Law Resources, Competition Law Links or Global Competition Law and Policy pages or visit our website at www.NortonStewart.com.

CONTACT US

We provide Canadian competition law services to clients across Canada and internationally. For more information about our Canadian competition law and consulting services contact us at steve@nortonstewart.com, info@competitionlawcanada.com or call us at +1 604 687 0555 or +1 778 867 5558.

DISCLAIMER

The materials and information on CANADIAN COMPETITION LAW are provided as legal information about Canadian competition law. Reading and accessing this information does not create a lawyer-client relationship. The information on our blog does not constitute legal advice or a legal opinion on any issue. In addition, the information and materials on this website will change based on new competition law developments and, as such, may not be current as of the date of access. As such, we take no responsibility for the accuracy or currency of the competition law information or materials on our blog, which should not be relied upon without receiving legal advice from competent legal counsel

CANADIAN COMPETITION ACT AMENDMENTS

Earlier this year, sweeping amendments were made to Canada’s Competition Act (the “Act”). The recent amendments were the most significant in twenty-five years. While most of the changes are now in effect, some of the amendments, including to the criminal conspiracy provisions, will come into effect in March next year.

Some of the key changes to the Act that impact Canadian companies and international companies investing and doing business in Canada include: