Canadian COMPETITION LAW

February 4, 2014

In an interesting and important development, Canada’s Federal Court of Appeal yesterday sent the Competition Bureau’s (the “Bureau”) abuse of dominance challenge against Canada’s largest real estate board back to the Competition Tribunal (the “Tribunal”) for redetermination.  This case is in many ways the first decided essential facilities case in Canada under the Competition Act (the “Act”), though remains to be decided on its facts when it returns to the Tribunal.

This case involves a challenge by the Bureau against The Toronto Real Estate Board (“TREB”) for allegedly abusing its dominance under section 79 of the Act in relation to membership rules restricting the use of the board’s MLS® listing data (for example, in relation to certain types of online brokerage services).  Violation of TREB’s rules may lead to consequences, including being barred from access to the board’s MLS® service or from being a member of the board.

Last April, the Tribunal dismissed the Bureau’s application (see: The Commissioner of Competition v. The Toronto Real Estate Board, 2013 Comp. Trib. 9).  In a short and blunt decision, the Tribunal at first instance found that subsection 79 of the Act, the abuse of dominance provision, did not apply on the facts of the case.  More specifically, the Tribunal found that TREB, as a trade association, did not compete in the relevant market (real estate services in the Greater Toronto Area); that its rules could not therefore have a negative effect on a competitor that is “predatory, exclusionary or disciplinary” (the general test for anti-competitive acts for the abuse of dominance provisions of the Act); and that there cannot be abuse of dominance without harm to a competitor (citing the Federal Court of Appeal in Canada’s leading abuse of dominance case, Canada Pipe (2006), 268 D.L.R. (4^th) 193 (F.C.A.)).

The Tribunal at first instance also strongly suggested that the relatively new civil agreements provision of the Act, section 90.1, which allows the Tribunal to make remedial orders where an agreement between competitors prevents or lessens competition substantially, was the more appropriate section under which the Bureau should bring this challenge against TREB.

The Federal Court of Appeal’s Decision

The Bureau appealed the Tribunal’s decision to the Federal Court of Appeal, which yesterday released its decision (The Commissioner of Competition v. The Toronto Real Estate Board, 2014 FCA 29) allowing the Bureau’s appeal and sending the Commissioner’s application back to the Tribunal for determination on the merits.

In its decision, the Federal Court of Appeal:

1. Confirmed earlier case law that the list of anti-competitive acts enumerated in subsection 78(1) of the Act (anti-competitive acts for the abuse of dominance provision) is not exhaustive.

2. Held that a person that is not a competitor in a particular market (such as a real estate board that does not compete in the market for real estate services) may nevertheless control that market substantially for the first branch of the test for abuse of dominance by controlling a significant input for competitors in that market (or by making rules that effectively control the business conduct of those competitors).

3. Held that a person that does not compete in a particular market does not mean that they cannot be found to have committed an anti-competitive act against competitors in that market (or that an abuse of dominance order can never be made against a person who controls a market otherwise than as a competitor).

4. Held that the Canada Pipe case, relied on by the Tribunal at first instance, did not stand for the proposition that there could never be an anti-competitive act against a person that was not a direct competitor (and recognized that the list of anti-competitive acts under subsection 78(1), in fact, includes one act that is not directed at competitors).  On this point, the Federal Court further held that “Parliament did not intend the scope of [the list of anti-competitive acts listed under subsection 79(1) of the Act] to be limited to acts only directed against direct competitors.

In sum, the Federal Court held that neither the relevant abuse of dominance provisions of the Act, nor the existing case law including the Canada Pipe case, precluded an abuse of dominance order under the Act against a real estate board simply because it does not compete with its members.

As such, the Federal Court of Appeal allowed the Bureau’s appeal, set aside the Tribunal’s order and referred the application back to the Tribunal for reconsideration on the merits.

Implications

There are a number of implications of this important Canadian appellate abuse of dominance decision.  These include an expanded ability of the Bureau generally to challenge entities under the abuse of dominance provisions of the Act, including potentially firms in a vertical relationship (based on the Court’s reasoning that a person need not be a competitor in a market in which effects are felt to be the subject of an abuse of dominance order under the Act).

There is also now a greater risk for trade and professional associations in Canada, where they may pass membership rules or otherwise take steps that may adversely impact competition in the market (or markets) in which their members compete.  These risks now include, among other things, potentially Tribunal remedial orders to stop or modify conduct and administrative monetary penalties (essentially civil fines) of up to $10 million where conduct is found by the Tribunal to violate the abuse of dominance provisions of the Act.

____________________

SERVICES AND CONTACT

I am a Toronto competition and advertising lawyer offering business and individual clients efficient and strategic advice in relation to competition/antitrust, advertising, Internet and new media law and contest law.  I also offer competition and regulatory law compliance, education and policy services to companies, trade and professional associations and government agencies.

My experience includes advising clients in Toronto, Canada and the US on the application of Canadian competition and regulatory laws and I have worked on hundreds of domestic and cross-border competition, advertising and marketing, promotional contest (sweepstakes), conspiracy (cartel), abuse of dominance, compliance, refusal to deal, pricing and distribution, Investment Canada Act and merger matters. For more information about my competition and advertising law services see: competition law services.

To contact me about a potential legal matter, see: contact

For more regulatory law updates follow me on Twitter: @CanadaAttorney

Comments are closed.