March 20, 2014
Canada’s Competition Bureau has issued new Price Maintenance Enforcement Guidelines for public comment (see: Competition Bureau Seeks Comments on its Draft Price Maintenance Guidelines).
In making the announcement, the Bureau said:
“The draft Price Maintenance Guidelines describe the Bureau’s general approach to enforcing section 76 of the Competition Act, including with respect to common business practices, such as minimum resale pricing, manufacturer-suggested resale pricing and minimum advertised pricing. The issuance of these draft Guidelines supports the Bureau’s Action Plan on Transparency, which aims to promote the development of a more cost-effective, efficient and responsive agency, while providing Canadians with more opportunities to learn about the Bureau’s work.”
The Bureau’s new Price Maintenance Guidelines are its longest and most comprehensive statement to date of its enforcement policy under the price maintenance provisions of the Competition Act and incorporate principles from the recent Visa/MasterCard decision handed down by the Tribunal.
At thirty-four pages, they also reflect the increased complexity of the price maintenance provisions since a market effects test was added in 2009, the more sophisticated economic approach generally to them over the past few years and a recognition (often overlooked, or largely overlooked, when the provisions were per se criminal offences) that price maintenance may well have pro-competitive justifications in some cases.
Canada’s former criminal price maintenance offences under section 61 of the Competition Act were repealed in 2009 and replaced with new civil provisions under section 76 of the Competition Act (for a brief overview of the current provisions see: here). Since the price maintenance provisions were de-criminalized there has, however, only been one price maintenance decision on an application brought by the Bureau (in the Bureau’s recent challenge of Visa/MasterCard – see: here).
The Bureau’s new draft Price Maintenance Guidelines discuss the three categories of price maintenance under section 76, the necessary elements to meet each and the requisite market effects element that has been in place since 2009 (i.e., that there be an “adverse effect on competition” in a market).
A few points that I found interesting on my first pass through the new Guidelines include the Bureau’s discussion of the potential application of section 76 to concerted conduct (e.g., the result of an agreement among competitors); the Bureau’s views on the extent that a product may be transformed and still considered “resold” for section 76 to apply (resale proving to be the pivotal issue in the recent Visa/MasterCard case); situations where a constructive refusal to supply may also satisfy the refusal to supply requirement under section 76(1)(a)(ii) (e.g., higher wholesale prices, poorer supply terms, etc.); the extent to which a person’s “low pricing policy” must be the cause of a refusal to supply to attract challenge under section 76 (which, according to the Bureau, need only be one factor); the Bureau’s discussion of market power and market power thresholds (taking the position that a share of less than 35% will typically not prompt further examination for the purposes of section 76); and the Bureau’s discussion of the interplay of section 76 and other potentially applicable Competition Act sections – for example, sections 45 (criminal conspiracy agreements) or 79 (abuse of dominance).
The Bureau’s new draft Guidelines also include relatively detailed examples of situations where price maintenance may be either pro- or anti-competitive, depending on the circumstances, discussions of potential retailer-based and supplier-based theories of harm and three hypothetical examples.
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