Canadian COMPETITION LAW

May 14, 2013

In an interesting though not totally unexpected development, the Competition Bureau announced earlier today that it was appealing the Competition Tribunal’s decision in the TREB abuse of dominance case to the Federal Court of Appeal (Commissioner of Competition v. The Toronto Real Estate Board, file no. A-174-13).

In dismissing the Bureau’s case, the Tribunal essentially concluded that the Bureau’s application had been wrongly made under the abuse of dominance provisions of the Competition Act (section 79) while suggesting that the more appropriate provision was the new civil agreement section of the Competition Act, section 90.1 (based, in part, on finding that TREB did not compete in the relevant market, residential real estate services in the GTA and, as such, any anti-competitive acts could not therefore be directed toward a competitor).

In announcing the appeal, Interim Commissioner of Competition John Pecman said:

“Allowing the Tribunal’s finding to stand could leave a significant loophole in the application of the Competition Act … While most trade associations comply with the Competition Act, we are concerned that, if the Tribunal’s decision is left to stand, trade associations may be tempted to develop rules aimed at preventing or eliminating potential new forms of competition.”

In the Bureau’s notice of appeal, in which it is seeking that the Tribunal’s order be set aside and the case returned to the Tribunal for re-determination, it argues among other things that the Tribunal erred by:

1.  Finding that section 79 does not apply to industry associations that do not compete in the market in which effects are alleged to be occurring, but engage in anti-competitive conduct in their members’ market (which appears to be the argument that under section 79 it is only necessary to control “a” market).  On the face of section 79 it is also possible to make challenges where a firm possesses market power in one market and through anti-competitive acts competition is prevented or lessened in another.

2.  Related to the above point, that a dominant firm must itself compete in a market that it controls.

3.  The Bureau also argues that the Tribunal erred in applying the Federal Court’s decision in Canada Pipe, which did not consider the second branch of the test for abuse of dominance (a practice of anti-competitive acts) in the context of a trade association.  This is apparently an effort to distinguish Canada Pipe.  The Bureau is also further attempting to challenge the Tribunal’s finding that a practice of anti-competitive acts must be directed at a competitor, arguing that the Tribunal erred in its interpretive findings in this regard that relied, among other things, on subsection 79(4) of the Act and on the Bureau’s own Abuse of Dominance Guidelines.

In sum, the Bureau’s arguments in its appeal focus on whether a firm (or in this case association) must be present or compete in the market in which anti-competitive effects are alleged and whether any anti-competitive acts engaged in by an association must be directed at one of its competitors (e.g., another trade or professional association).

As I pointed out in my earlier note on the Tribunal’s dismissal of this case, perhaps the most interesting question is the extent to which trade or professional associations can be used as a structure to avoid the abuse of dominance provisions of the Competition Act.

If the Bureau is successful, it seems to me that it will generally retain broader options to challenge trade and professional association conduct, including potentially single or joint dominance theories and an ability to seek administrative monetary penalties for challenged association conduct (a remedy only recently added to the abuse of dominance provisions of the Act but not available under the civil agreement provision).  On the other hand, if TREB succeeds, the Bureau’s avenues of potential challenges of associations and available remedies may be narrower, although similar challenges could still, as the Tribunal pointed out, be made under the civil agreement provision, albeit without the availability of AMPs.  As a practical matter, the Bureau, even if it lost its appeal, would also still retain its ability to challenge association conduct under other provisions of the Act, including in some cases the criminal conspiracy provisions (e.g., in relation to alleged price-fixing, boycott or other concerted conduct).

The case could also have wider implications including new authority for challenging conduct with effects in unrelated markets and potentially generally broadening the application of the abuse of dominance provisions to include conduct that is not directly aimed toward competitors.

It also seems to me to be worth pointing out that, although there is quite established authority in Canada that anti-competitive effects must be directed toward competitors, that question can in reality be much more difficult in some cases and a matter of characterization (not unlike similar issues that can arise in the context of cartel challenges to associations related to whether board members or other executives are acting in the interests of the association, and therefore arguably unilateral conduct, or in individual or private interests, thereby supporting a concerted theory of harm).

In any event, it will be very interesting indeed to see what arguments are made by TREB in response to the Bureau’s new challenge and on what side, if the case proceeds to a hearing, the Court will fall.

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