Abuse of dominance.
Abuse of dominance, or “abuse of dominant position” as it is phrased in section 79 the federal Competition Act, is the equivalent in Canada to monopolization in the U.S. under the Sherman Act and parallels Article 102 of the Treaty Establishing the European Community in the European Union.
In order to establish that a firm (or firms) has abused its dominance, the Commissioner of Competition must establish before the federal Competition Tribunal that: (a) a firm (or firms) is dominant in one or more relevant markets, (b) the firm has engaged in, or is engaging in, a practice of anti-competitive acts and (b) the firm’s conduct has, is or will likely result in a prevention or substantial lessening of competition in a market. Section 78 of the Act sets out a non-exhaustive list of “anti-competitive acts” for the purposes of section 79, which has been expanded by case law since 1986 when the modern Act was introduced.
Competition Bureau, Enforcement Guidelines, The Abuse of Dominance Provisions: Sections 78 and 79 of the Competition Act (2012): “Abuse of a dominant position occurs when a dominant firm or a dominant group of firms in a market engages in a practice of anti-competitive acts, with the result that competition has been or is likely to be prevented or lessened substantially.”
Competition Bureau, Draft Updated Enforcement Guidelines: The Abuse of Dominance Provisions (2009): “Abuse of a dominant position occurs when a dominant firm in a market or a dominant group of firms, engages in conduct that is intended to eliminate or discipline a competitor or to deter entry or expansion by competitors, with the result that competition is prevented or lessened substantially. These provisions, contained in sections 78 and 79, establish the bounds of legitimate competitive behavior and provide for corrective action when firms engage in anti-competitive activities that damage or eliminate competitors that are likely to substantially lessen or prevent competition.”
OECD, Abuse of Dominance and Monopolisation: “A firm’s ability to raise its prices is usually constrained by competitors and the possibility that its customers can switch to alternative sources of supply. When these constraints are weak, a firm is said to have market power and if the market power is great enough, to be in a position of dominance or monopoly (the precise terminology differs according to the jurisdiction). While mere possession of monopoly power does not in itself constitute violation of competition laws, the abuse of such power – particularly if it is used to weaken competition further by excluding rivals – calls for intervention from competition authorities. Determining when a firm’s behaviour is an abuse of market power, as opposed to a competitive action, is one of the most complex and controversial areas in competition policy. Competition laws typically contain provisions prohibiting abuse of market power by dominant firms or attempts of not yet dominant firms to monopolise markets. Examples of abusive practices typically include: predatory pricing, loyalty rebates, tying and bundling, refusals to deal, margin squeeze excessive pricing.”
See also: Enforcement Guidelines on the Abuse of Dominance Provisions (July, 2001), the Information Bulletin on the Abuse of Dominance Provisions as Applied to the Canadian Grocery Sector (November, 2002), the Information Bulletin on the Abuse of Dominance Provisions as Applied to the Telecommunications Industry (June, 2008), Competition Bureau, Draft Updated Enforcement Guidelines: The Abuse of Dominance Provisions (2009).
Asian Development Bank (ADB), Competition Law Toolkit, Overview of Competition Law Practices: “Abusive behavior by a monopolist, or by a dominant firm with substantial market power which enables it to behave as if it were a monopolist, can also be condemned by competition law, e.g. where a dominant firm reduces its prices to less than cost in order to drive a competitor out of the market, or to deter a competitor from entering the market so that it can subsequently charge higher prices—a phenomenon known as predatory pricing.”
Government of Canada, Canada’s Anti-Spam Legislation (www.fightspam.gc.ca), FAQs: “This refers to the collection of email addresses through the use of things such as ‘web crawlers,’ which are computer programs that scan websites, usenet groups and social networking sites, trolling for posted electronic addresses; and ‘dictionary attacks,’ in which a computer program guesses live email addresses by methodically trying multiple name variations within a particular group of common email domains, such as Hotmail or Gmail. Once collected, email addresses are often sold to spammers as destinations for unsolicited electronic messages.”
Adequate and proper testing.
In addition to the general misleading advertising provisions of the Competition Act (sections 52 and 74.01), and a number of other provisions of the Act that regulate specific types of advertising and marketing conduct, the Act also contains a specific performance claims provision (paragraph 74.01(1)(b)), which requires any person that makes a “representation to the public in the form of a statement, warranty or guarantee of the performance, efficacy or length of life of a product” to have performed “adequate and proper tests” before the claim is made. The federal Competition Tribunal has given some consideration of relevant factors as to when testing will be adequate and proper.
See e.g., Canada (Commissioner of Competition) v. Imperial Brush Co. (2008), 2008 Comp. Trib. 2 (Comp. Trib.): “In summary, and in respect of this case, I conclude that a ‘proper and adequate’ test depends on the claim made as understood by the common person; must be reflective of the risk or harm which the product is designed to prevent or assist in preventing; must be done under controlled circumstances or in conditions which exclude external variables or take account in a measurable way for such variables; are conducted on more than one independent sample wherever possible; results need not be measured against a test of certainty but must be reasonable given the nature of the harm at issue and establish that it is the produce itself which cases the desired effect in a material manner; and must be performed regardless of the size of the seller’s organization or the anticipated volume of sales.”
Administrative monetary penalty (AMP).
The civil misleading advertising (section 74.01) and abuse of dominance (section 79) provisions of the Competition Act include “administrative monetary penalties” or “AMPs” as penalties (essentially civil fines). Under subsection 74.1(1) of the Competition Act (the penalties section for civil misleading advertising) a court may impose AMPs of up to $750,000 for individuals (up to $1 million for subsequent orders) and up to $10 million for corporations (up to $15 million for subsequent orders). Under subsection 79(3.1) of the Competition Act, the federal Competition Tribunal may order a person to pay an AMP of up to $10 million ($15 million for subsequent orders). The size of AMPs that may be imposed under the misleading advertising provisions was significantly increased as a result of the amendments to the Act that were introduced in 2009. AMPs were introduced as a potential penalty for abuse of dominance for the first time in Canada as a result of those same amendments.
Competition Bureau, Frequently Asked Questions – Amendments to the Competition Act: “Administrative monetary penalties, or ‘AMPs,” are civil remedies, and quite distinct from fines (which are criminal). The purpose of an AMP is to promote and encourage compliance with the Competition Act, and failure to pay one may be enforced civilly as a debt due to the Crown. A fine, by contrast, is a punishment imposed by a court upon conviction of a criminal offence, and failure to pay may lead to imprisonment.”
Advance fee fraud (aka West African scam, 419 scam or Nigerian scam).
RCMP, Advance Fee Fraud: “Classified advertisements for loan opportunities do not guarantee the legitimacy of a company. Some companies claim they can guarantee you a loan even if you have a bad credit history or no credit-rating at all. They usually request an up-front fee of several hundred dollars. If you send your money to these companies, it is unlikely you will get your promised loan and your advance payment will be at risk. Advance fee loans operating for a criminal purpose generate millions of dollars annually in Canada. Persons with poor credit ratings are usually the key targets and once the ‘loan processors’ receive your money, they usually disappear.”
Competition Bureau, The Little Black Book of Scams (2012): “The Nigerian scam (also called the 419 fraud) has been on the rise since the early-to-mid 1990s in Canada. Although many of these sorts of scams originated in Nigeria, similar scams have been started all over the world (particularly in other parts of West Africa and in Asia). These scams are increasingly referred to as ‘advance fee fraud’. In the classic Nigerian scam, you receive an email or letter from a scammer asking your help to transfer a large amount of money overseas. You are then offered a share of the money if you agree to give them your bank account details to help with the transfer. They will then ask you to pay all kinds of taxes and fees before you can receive your ‘reward’. You will never be sent any of the money, and will lose the fees you paid.”
RCMP, Internet Security: “Fraud letters from Nigeria (and other African countries) is a type of scam that has been around for a number of years. Businesses, educational institutions and government departments were originally the prime targets of electronic messages bearing the promise of substantial amounts of money from alleged government or company officials in Nigeria. The general public is now also targeted, and thousands of people like you receive similar e-mail messages in their personal mail boxes. In some cases, con artists even send stolen or forged cheques to their victims. This scam can also be done by phone and from many countries. In addition to money you can be asked for confidential information against the promise of profits.”
Joewein.de LLC: “The so-called ‘419’ scam (aka ‘Nigeria scam’ or ‘West African’ scam) is a type of fraud named after an article of the Nigerian penal code under which it is prosecuted. It is also known as ‘Advance Fee Fraud’ because the common principle of all the scam format is to get the victim to send cash (or other items of value) upfront by promising them a large amount of money that they would receive later if they cooperate. In almost all cases, the criminals receive money using Western Union and MoneyGram, instant wire transfer services with which the recipient can’t be traced once the money has been picked up. These services should never be used with people you only know by email or telephone! Typically, victims of the scam are promised a lottery win or a large sum of money sitting in a bank account or in a deposit box at a security company. Often the storyline involves a family member of a former member of government of an African country, a ministerial official, an orphan or widow of a rich businessman, etc. Variants of the plot involving the Philippines, Taiwan, China, Hong Kong, Korea, Iraq, Kuwait, UAE, Mauritius, etc. are also known. Some emails include pictures of boxes stuffed with dollar bills, scans of fake passports, bank or government documents and pictures of supposedly the sender.”
Advance ruling certificate (ARC).
The strongest of several forms of merger control clearance under the Competition Act.
Competition Bureau, Enforcement Guidelines, Merger Review Process Guidelines (2009): “The amendments to the merger review framework do not alter the parties’ ability to request (or the Bureau’s ability to issue) an Advance Ruling Certificate (“ARC”) under section 102 of the Act. The Commissioner may issue an ARC [under section 102 of the Competition Act] in response to a request for assurances that a proposed transaction will not give rise to proceedings under section 92 of the Act. Where information has been supplied in support of an ARC request, and that information is substantially similar to the information required under subsection 114(1), the Commissioner or a person authorized by the Commissioner may, under paragraph 113(c) of the Act, waive the subsection 114(1) notification requirement and, consequently, the applicable waiting period.”
See also section 102 of the Competition Act; definition of “no action letter”.
Adverse effect on competition.
The federal Competition Act contains several competitive effects standards as follows: an “adverse effect” on competition (sections 75 (refusal to deal) and 76 (price maintenance)) and a “substantial prevention or lessening” of competition or “SPC” or “SLC” (sections 79 (abuse of dominance), 90.1 (the civil agreements provision) and 92 (mergers)). These so-called “market effects tests” require that a particular impact on a relevant market (or markets) be proved as part of each section (i.e., as a required element of each section).
B-Filer Inc. et al. v. The Bank of Nova Scotia, 2006 Comp. Trib. 42: “for a refusal to deal to have an adverse effect on a market, the remaining market participants must be placed in a position, as a result of the refusal, of created, enhanced or preserved market power.”
Nadeau Poultry Farm Ltd. v. Groupe Westco Inc., 2009 Comp. Trib. 6, citing Canada (Director of Investigation and Research) v. NutraSweet Co. (1990), 32 C.P.R. (3d) 1: “market power is generally accepted to mean an ability to set prices above competitive levels for a considerable period.”
Advertising Standards Canada, Canadian Code of Advertising Standards: “Advertising is defined in the Code as any message (the content of which is controlled directly or indirectly by the advertiser) expressed in any language and communicated in any medium to Canadians with the intent to influence their choice, opinion or behaviour. Excluded from the definition of “medium” and the application of the Code are: (i) foreign media (namely media that originate outside Canada and contain the advertising in question) unless the advertiser is a Canadian person or entity; and (ii) packaging, wrappers and labels. Also excluded from the application of the Code are political and election advertising.”
Consumer Protection BC, “Top Ten Scams 2013 – Just in case a scam is around the corner”: “Consumers posting ads to free online listings like Craigslist to sell a vehicle are the target of unlicensed telemarketing companies. These companies are trolling through online ads to find someone to make a quick buck from. Companies often guarantee to sell vehicles quickly and promise a money-back guarantee. Problem is that these guaranteed vehicle brokers rarely sell your vehicle, rarely provide refunds, and only post your own ad to other free online listings – charging you a $500 fee for things you probably could do yourself for free.”
Under section 124.1 of the Competition Act, any person may apply to the Commissioner of Competition, together with supporting information, for a binding written opinion regarding the application of any provision of the Act. Written opinions can be a practical way for businesses and individuals to reduce potential competition law liability for proposed conduct. A written opinion is binding on the Commissioner if all material facts relating to the proposed conduct have been submitted. If issued, written opinions remain binding for as long as the material facts on which they are based remain substantially unchanged and the conduct is carried out substantially as proposed. Binding written opinions are available, subject to the Commissioner’s discretion to issue them, for proposed conduct only. In other words, the Bureau will not issue advisory opinions for existing business conduct.
Written opinions are available under the following provisions of the Act, among others: resale price maintenance (section 76), exclusive dealing / tied selling / market restriction (77), abuse of dominance (79), civil agreements provision (90.1), conspiracy (45), misleading advertising and deceptive marketing practices (52, 55.1, 74.01, 74.06), deceptive telemarketing (52.1), deceptive prize notices (53), multi-level marketing and pyramid selling (55 and 55.1), performance claims (74.01(1)(b)) and promotional contests (74.06).
See Competition Act section 124.1; Competition Bureau, website, Legal Actions and Opinions section; Competition Bureau, Bulletin, Competition Bureau Fee and Service Standards Handbook for Written Opinions; definition of “written opinion”.
Consumer Protection BC, “Top Ten Scams 2013 – Just in case a scam is around the corner”: “When a scam artist targets a group of people who know each other, it is called an affinity fraud. The investment schemes they promote may change or vary over time, but the methods they use to target groups are often the same. To be successful, scam artists need to earn the trust of an influential person in a group, family, or workplace. Once they establish this bond (and this can take time), they use this connection to get their hands on the money of other people in the group. In some cases, they may even pay the influencer to help them out, never telling the person that the investment is really a scam.”
“Aiding” and “abetting”.
Under the Competition Act, a person or corporation may be liable as a party to an offence or, alternatively, for aiding or abetting an offence (e.g., for assisting parties form or maintain a cartel/conspiracy, etc.). The aiding and abetting offences are found in section 21 of the federal Criminal Code.
Section 21 provides that “every one is a party to an offence who (a) actually commits it; (b) does or omits to do anything for the purpose of aiding any person to commit it; or (c) abets any person in committing it.”
See R. v. Campbell,  20 O.R. 487 (C.A.) where the Ontario Court of Appeal held: “[t]o me it is inconceivable that Parliament in enacting the Combines Investigation Act [the predecessor anti-combines statute in Canada to the Competition Act] should have intended to make a person, sometimes conveniently referred to as the ‘principal’, guilty of an offence thereby created and not bring within the scope of that offence a person who aids and abets that ‘principal’, and, without whose aid and assistance, conceivably, the offence could not be committed. The rule that makes a person who aids and abets another in the commission of an offence a party thereto is so deeply engrained in our criminal law that, in my opinion, language much more compelling than anything contained in the Combines Investigation Act would be required to displace it.”
See also Calvin S. Goldman and John D. Bodrug, eds., Competition Law of Canada, looseleaf (New York: Juris, 1988 – ) at § 3.03, where the authors state: “[p]rovisions of the Criminal Code respecting aiding and abetting apply in prosecutions for competition offences. Where a corporation is found guilty of committing an offence, a court may, in its discretion, find individuals involved guilty as aidors and abettors to the extent that they had knowledge of the facts underlying the offence. A corporation may also be guilty of aiding and abetting where it can be shown that the directing mind of the corporation has knowledge of the facts underlying the offence.”
See also Competition Bureau, News Release, “Mitsubishi Fined $1,000,000 for Aiding and Abetting Graphite Electrode Cartel” (May 12, 2005).
See also, Competition Bureau, Competitor Collaboration Guidelines (2009) discussing the different potential bases for liability for trade associations, as principal parties or alternatively for aiding and abetting: “Agreements between members of a trade or other industry association may also constitute agreements between competitors for the purpose of section 45. Rules, policies, by-laws or other initiatives enacted and enforced by an association with the approval of members who are competitors, are considered by the Bureau to be agreements between competitors for the purpose of section 45. In the event that such an agreement contravenes section 45, the trade association may be considered to be a principal party to the offence or may be subject to prosecution through the aiding and abetting provisions in section 21 of the [Criminal] Code.”
Phillip Johnson, Ambush Marketing and Brand Protection (Oxford University Press, 2012): “Ambush marketing is any attempt to create an unauthorized or false association with an event thereby interfering with the legitimate contractual rights of the event’s official marketing partners.”
Under section 75 of the Competition Act, refusal to deal, one of the necessary elements for the Competition Tribunal to order a supplier to resupply on usual trade terms is that the product in issue be in “ample supply”.
Federal Court of Appeal, Nadeau Poultry Farm Limited v. Groupe Westco Inc., per Pelletier J.A.: “I agree with the Tribunal’s conclusion on the issue of ample supply but I would formulate the test in terms of what constitutes ample supply rather than what constitutes a lack of ample supply. I would say that a product is in ample supply when producers of that product have the capacity to increase production in a timely way to meet increases in demand for the product. Where there is a lack of capacity to increase production to meet increases in demand, the result is product shortage, which requires suppliers to choose between supplying existing customers at historic levels and supplying new customers. Product shortage also results in price increases which, as the Tribunal found, was likely to occur … if the respondents’ refusal to deal were allowed. … A market in which increased demand for a product can only be accommodated by diverting supplies from one customer to another is not a market in which the relevant product is in ample supply.”
Ancillary restraints defence (ARD).
Following amendments to the Competition Act in 2009, a new ancillary restraints defence was added under section 45 of the Competition Act (criminal conspiracy agreements). Under subsection 45(4) of the Competition Act, no persons shall be convicted under section 45 if they establish on the civil standard of proof (i.e., on a balance of probabilities) that the challenged agreement is: (i) ancillary to a broader or separate agreement that, considered alone, does not contravene section 45 and (ii) is directly related to, and reasonably necessary for giving effect to the objective of that broader or separate agreement or arrangement. The ARD is modeled after the “ancillary restraints doctrine” developed in the United States. Under the U.S. doctrine, courts examine whether the challenged conduct is a “naked restraint” on competition and, therefore illegal, or merely ancillary to the legitimate and competitive objectives of a business and, therefore, legal.
See also: Competition Bureau, Competitor Collaboration Guidelines, Stikeman Elliott LLP, 2012 Competition Act & Commentary, Commentary 3, Competitor Collaboration, J. Musgrove, ed., Fundamentals of Canadian Competition Law, 2nd ed. (Toronto: Carswell, 2010), Chapter 4, Criminal Conspiracy, Thomas A. Piraino, “The Antitrust Analysis of Joint Ventures after the Supreme Court’s Dagher Decision”, 57 Emory L.J. 735 (2008).
Under the abuse of dominance provisions of the Competition Act, it must be shown, as one of three necessary elements, that a dominant firm has engaged in a practice of “anti-competitive acts”. The Competition Tribunal has held that conduct must be engaged in by a dominant firm for the purpose of exercising a “predatory, exclusionary or disciplinary” effect on competitors. Section 78 of the Act sets out a non-exhaustive list of practices that may be held to be anti-competitive acts for the purposes of section 79 (abuse of dominance), with other types of conduct having been held by the Tribunal since the modern Competition Act was introduced in 1986 to also constitute anti-competitive acts. Some examples of conduct held (or could be held) to be anti-competitive acts for the purposes of section 79 include: below cost pricing (i.e., “predatory pricing”); exclusive distribution arrangements (e.g., exclusive supply agreements that make it more difficult for competing suppliers to access customers); foreclosing access to essential inputs (sometimes referred to as “essential facilities”); the introduction of short-term “fighting” or “flanking” brands to discipline or eliminate new entrants; refusals to deal or supply; customer loyalty programs; and tied selling arrangements.
See e.g., Competition Bureau, Updated Draft Enforcement Guidelines on the Abuse of Dominance Provisions, The Abuse of Dominance Provisions as Applied to the Canadian Grocery Sector, Enforcement Guidelines on the Abuse of Dominance Provisions.
See also Canada (Director of Investigation and Research) v. NutraSweet (1990), 32 C.P.R. (3d) 1 (Comp. Trib.): “[The list of anti-competitive acts in section 78 of the Act] is clearly not meant to be exhaustive and the respondent claims that other conduct not specifically mentioned in section 78 can constitute an anti-competitive act. A number of the acts share common features but … only one feature is common to all: an anti-competitive act must be performed for a purpose, and evidence of this purpose is a necessary ingredient. The purpose common to all acts, save that found in pargraph 78(f), is an intended negative effect on a competitor that is predatory, exclusionary or disciplinary.”
Canada (Commissioner of Competition) v. Canada Pipe Co. 2006 FCA 233: “… the type of purpose required in the context of paragraph 79(1)(b): to be considered ‘anti-competitive’ under paragraph 79(1)(b), an act must have an intended predatory, exclusionary or disciplinary negative effect on a competitor. The paragraph 79(1)(b) inquiry is thus focused upon the intended effects of the act on a competitor. As a result, some types of effects on competition in the market might be irrelevant for the purposes of paragraph 79(1)(b), if these effects do not manifest through a negative effect on a competitor. It is important to recognize that ‘anti- competitive’ therefore has a restricted meaning within the context of paragraph 79(1)(b). While, for the Act as a whole, ‘competition’ has many facets as enumerated in section 1.1, for the particular purposes of paragraph 79(1)(b), ‘anti-competitive’ refers to an act whose purpose is a negative effect on a competitor.”
The Commissioner of Competition v. Reliance Comfort Limited Partnership, 2013 Comp. Trib. 4 (Comp. Trib.), citing Canada (Commissioner of Competition) v. Canada Pipe Corporation Ltd., 2006 FCA 233, 268 D.L.R. (4th) 193: “The second element which must be established by the Commissioner is that the respondent(s) have engaged in, or are engaging in, a practice of anti-competitive acts. In Canada (Commissioner of Competition) v. Canada Pipe Corporation Ltd., 2006 FCA 233, 268 D.L.R.(4th) 193, leave to appeal to SCC refused, 31637 (May 10, 2007), the Federal Court of Appeal dealt extensively with this element and stated that an anti-competitive act is one whose purpose is an intended negative effect on a competitor that is predatory, exclusionary or disciplinary. The Court of Appeal added that the proof of the intended nature of the negative effect on a competitor can be established directly through evidence of subjective intent, or indirectly by reference to the reasonably foreseeable consequences of the acts themselves and the circumstances surrounding their commission, or both. The Federal Court of Appeal, at paragraph 73, also stated that ‘[i]n appropriate circumstances, proof of a valid business justification for the conduct in question can overcome the deemed intention arising from the actual or foreseeable effects of the conduct, by showing that such anti-competitive effects are not in fact the overriding purpose of the conduct in question.’”
Asian Development Bank (ADB), Competition Law Toolkit, Overview of Competition Law Practices: “Agreements that have as their object or effect the restriction of competition are unlawful, e.g., to fix prices, to share markets, or to restrict output—often referred to as horizontal agreements or as cartels—are severely punished; and in some systems of law, can even lead to the imprisonment of the individuals responsible for them. Agreements between firms at different levels of the market—known as vertical agreements—may also be struck down where they could be harmful to competition, e.g. where a supplier instructs its retailers not to resell its goods at less than a certain price; this is often referred to as resale price maintenance. However, as a general proposition, vertical agreements are not harmful to competition.”
United States Federal Trade Commission, Competition Counts: How Consumers Win When Businesses Compete: “The word ‘antitrust’ dates from the late 1800s, when powerful companies dominated industries, working together as ‘trusts’ to stifle competition. Thus, laws aimed at protecting competition have long been labeled ‘antitrust’ in news stories about competitors merging or companies conspiring to reduce competition.”
Fundamentals of Canadian Competition Law, J. Musgrove ed., 2nd edition (Carswell, 2010) at 1: The somewhat peculiar term “antitrust” law is the result of the fact that when the U.S. Sherman Act was proposed, in the late 1880s, a number of significant business enterprises were held under common beneficial ownership by means of trusts.”
Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 334 (1990): “Antitrust injury” refers to injury attributable to an anti-competitive aspect of the practice under scrutiny”. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977): “Plaintiffs must prove antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants’ acts unlawful. The injury should reflect the anticompetitive effect either of the violation or of anticompetitive acts made possible by the violation.”
Justice Thurgood Marhall, U.S. Supreme Court Justice, United States v. Topco Associates, Inc., 405 U.S. 596, 610 (1972): “Antitrust laws … are the Magna Carta of free enterprise. They are as important to the preservation of economic freedom and our free-enterprise system as the Bill of Rights is to the protection of our fundamental personal freedoms.”
New York Times, “Antitrust Laws and Competition Issues”: “It is not unlawful for a company to gain control of a market. It becomes unlawful if the company engages in conduct to exclude or harm competitors with no business justification. The laws that govern the limits of monopolies, known as antitrust laws, date to the 1890s, but the field is still evolving. The goal of the laws is to protect consumers by promoting competition. The initial era of antitrust law was prompted by the rise of monopolies in the late 1800s — companies like Standard Oil and U.S. Steel that were so dominant in their fields they were able to control the price of their products. Amid public anger over the trusts, Congress passed a series of acts meant to give government the power to step in when one company’s power limited competition in a way that drove up prices or stifled innovation. The most famous of these laws was the Sherman Act of 1890, which made it illegal for companies to collude to fix prices, and for monopolies to unfairly block competition. In 1914, the Clayton Act was passed to give the government the power to block mergers that were likely to undermine competition. That same year, the Federal Trade Commission was created and given a mission of stopping unfair methods of competition and deceptive practices. The interpretation and application of these laws has varied over the years, in part reflecting court rulings and in part each administration’s preferences on the subject. …”
Assumed sale technique.
A type of advertising fraud.
Lisa Campbell, Deputy Commissioner of Competition, Fair Business Practices Branch, Competition Bureau, “Watch What You Say: Views From the Competition Bureau”, presentation at 2012 Competition Law Spring Forum, Toronto (May 2, 2012): An assumed sale technique “[leads] businesses into believing that a sale [has] already taken place … and that payment [is] due.”
Automated calling devices.
CRTC: “Automated calling devices are used to dial telephone numbers and automatically deliver a pre-recorded message. The CRTC’s Automatic Dialing and Announcing Device Rules prohibit telemarketers from using these devices to sell or promote a product or service unless a consumer has consented to be called by them.”
CRTC Unsolicited Telecommunications Rules: “’Automatic Dialing-Announcing Device’ or ‘ADAD’ means any automatic equipment incorporating the capability of storing or producing telecommunications numbers used alone or in conjunction with other equipment to convey a pre-recorded or synthesized voice message to a telecommunications number.”
One measure of cost for a predatory pricing analysis.
Competition Bureau, Enforcement Guidelines, The Abuse of Dominance Provisions: Sections 78 and 79 of the Competition Act (2012): “The Bureau’s view is that average avoidable cost is the most appropriate cost standard to use when determining if a dominant firm’s prices are below cost. Avoidable costs refer to all costs that could have been avoided by a firm had it chosen not to sell the product(s) in question during the period of time the policy has been in place. [Footnote: Avoidable costs include variable costs (costs that vary with output, such as labour, materials, rent and utility costs, and depreciation) and product-specific fixed costs (costs that do not vary with output, such as the cost of land, buildings, and machinery) but do not include sunk costs (historical costs that cannot be recovered if a firm stops producing). Avoidable costs do not include common costs that cannot be directly attributed to a particular product or products.] The Bureau will examine whether an alleged predatory price is able to cover the dominant firm’s average avoidable cost of supplying the product(s) in question during the time period over which the alleged predation has occurred. As there are difficulties inherent in applying a price-cost test and in distinguishing between predatory and competitive pricing (as both involve lower prices in the short term), the Bureau generally uses various “screens” prior to conducting an avoidable cost analysis. Specifically, the Bureau will examine whether the alleged predatory price can be matched by competitors without incurring losses (suggesting that discipline or exclusion, and subsequent recoupment, is unlikely to occur), as well as whether the alleged predatory price is in fact merely ‘meeting competition’ by reacting to match a competitor’s price.”
Competition Bureau, Draft Updated Enforcement Guidelines on the Abuse of Dominance Provisions (2009): “Having established dominance, the Bureau will consider whether the dominant firm is pricing below some measure of its costs. The Tribunal emphasized the importance of such a price-cost comparison in the NutraSweet case. In conducting such price-cost comparisons, the Bureau’s view is that average avoidable costs are the most appropriate cost standard to use when determining if prices are predatory. Avoidable costs refer to the costs that a firm could have avoided had it chosen not to sell the product(s) in question during the period of time the practice of low pricing was in place. In addition to examining whether the dominant firm is pricing below its average avoidable cost, the Bureau will also examine whether the alleged victim’s business in the relevant market is, or is likely to become, unprofitable as a result of the alleged predatory conduct. In order to help assess this, the Bureau will ask the alleged victim(s) to provide information on earnings on operations segregated by the relevant market or markets in question during the time period the alleged predatory pricing policy has been in effect and during previous time periods.”
Competition Bureau, Predatory Pricing Enforcement Guidelines (2008): “To determine whether a pricing policy or practice raises an issue under the Act, the Bureau determines whether the firm charging the price was able to cover the average avoidable costs of supplying the product(s) in question. Avoidable costs refer to all costs that could have been avoided by a firm had it chosen not to sell the product(s) in question during the period of time the policy has been in place. Certain costs can be avoided by ceasing production or by redeploying production inputs to other uses. For the purpose of calculating avoidable costs, a number of concepts are relevant: (i) variable costs, that is all costs which vary with the level of output (ii) fixed costs, that is costs that do not vary with the level of output such as the cost of land, buildings and machinery and; iii) sunk costs which cannot be recovered if a firm stops producing. The latter are equal to an asset’s historic cost less its value redeployed into its next best alternative use or salvage value. Avoidable costs include variable costs and some fixed costs (which are product-specific) but do not include sunk costs.”
Competition Bureau, Draft Enforcement Guidelines on Abuse of Dominance in the Airline Industry (2001): “To apply the avoidable cost test, the Bureau compares the revenues earned as a result of providing a service to the avoidable costs of providing that service. Avoidable costs refer to all costs that could have been avoided by the dominant airline had it chosen not to offer the service in question. If the revenues the dominant airline earns from the service do not cover the avoidable costs of a particular service, then the Bureau would conclude that the airline is engaging in anti-competitive conduct.”
For more information about our regulatory law services contact us: contact
For more regulatory law updates follow us on Twitter: @CanadaAttorney