Canadian COMPETITION & ANTITRUST LAW

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.  For the Competition Bureau’s interpretation of the abuse of dominance provisions of the Act in Canada see: 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) and the Bureau’s draft Updated Enforcement Guidelines on the Abuse of Dominance Provisions (January, 2009).

Abusive behavior.  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.”

Address harvesting. 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.”

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 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).  See e.g., 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. 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.”

Advisory opinion. 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”.

“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, [1964] 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[5], 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.”

Ample supply.  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, 2^nd 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).

Anti-competitive act. 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.”

Anti-competitive agreement.  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.”

Antitrust. 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., 2^nd 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.”

Antitrust laws. 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.”

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.”