U.S. Federal Government, Electronic Code of Federal Regulations, Title 16: Commercial Practices, Part 238 – Guides Against Bait Advertising: “Bait advertising is an alluring but insincere offer to sell a product or service which the advertiser in truth does not intend or want to sell. Its purpose is to switch consumers from buying the advertised merchandise, in order to sell something else, usually at a higher price or on a basis more advantageous to the advertiser. The primary aim of a bait advertisement is to obtain leads as to persons interested in buying merchandise of the type so advertised.”
Bait and switch.
The Competition Act contains “general” misleading advertising provisions, which generally prohibit false or misleading claims to the public to promote a product or any business interest (sections 52 and 74.01). In addition to these general misleading advertising provisions, the Act also contains a number of other sections that prohibit or regulate specific forms of marketing and advertising practices, including “bait and switch selling” (section 74.04).
Competition Bureau, Ensuring Truth in Advertising – Bait and Switch Selling: “The Competition Act prohibits ‘bait and switch’ selling which occurs when a product is advertised at a bargain price, but is not available for sale in reasonable quantities. The provision does not apply if the advertiser can establish that the non-availability of the product was due to circumstances beyond its control, the quantity of the product obtained was reasonable, or the customer was offered a rain check when supplies were exhausted.”
Competition Bureau, Pamphlet, Bait and Switch Selling: “Under the Competition Act, retailers are prohibited from advertising products at bargain prices that they do not have available in reasonable quantities. Liability will be avoided where the advertiser can establish that the non-availability of the product was due to circumstances beyond its control, the quantity of the product was obtained when reasonable, or the customer was offered a rain check when supplies were exhausted. Retailers who contravene the law may be ordered by a court to stop the conduct, to publish a corrective notice, and/or to pay an administrative monetary penalty.”
See also, Better Business Bureau (BBB) Code of Advertising: “[A] ’Bait’ offer is an alluring but insincere offer to sell a product or service which the advertiser does not intend to sell. Its purpose is to switch consumers from buying the advertised merchandise or service, in order to sell something else, usually at a higher price or on a basis more advantageous to the advertiser.”
See also Competition Act, section 74.04.
Barriers to entry.
Barriers to entry are indirect indicators used to assess market power and potential competitive effects, for example whether a firm (or firms) possesses market power (i.e., is dominant) in an abuse of dominance analysis or whether a merged entity will likely be able to exercise market power post-completion in a merger. Barriers to entry is commonly, together with a firm (or firms) market share, a key factor in considering whether market power is likely to be able to be exercised.
OECD, Competition Assessment Toolkit (2011): “Barriers-to-entry can broadly be defined as those factors that might hinder the entry of new firms into the relevant market. Evaluating the magnitude of barriers-to-entry is important as it provides … a perspective of the extent of potential competition that the incumbent firm(s) might face. For example, if barriers-to-entry are high, incumbents can engage in anti-competitive behavior, raise prices and enjoy elevated profits without fearing that new entry will erode their profits. To put it differently, lower entry barriers give rise to greater potential competition and have a disciplining effect on incumbent firms in the market, restraining the exercise of market power.”
Competition Bureau, Enforcement Guidelines, The Abuse of Dominance Provisions: Sections 78 and 79 of the Competition Act (2012): “… barriers can take many forms, including sunk costs, regulatory barriers, economies of scale and scope, market maturity, network effects, access to scarce or non-duplicable inputs, and existing long-term contracts.”
Competition Bureau, Updated Draft Enforcement Guidelines on the Abuse of Dominance Provisions (2009): “… high market share is not in itself sufficient to prove market power. A firm’s attempt to exercise market power may be thwarted by entry or expansion of existing and/or potential competitors on a sufficient scale and scope, if entry/or expansion is expected to be profitable. Factors that reduce the likelihood of this profitability are referred to as barriers to entry. Barriers to entry can take many forms, from factors that deter entry by raising costs to factors that preclude entry absolutely. These can include sunk costs, regulatory barriers, economies of scale and scope, market maturity, network effects, access to scarce or non-duplicable inputs, and long term contracts.”
Competition Bureau, Enforcement Guidelines on the Abuse of Dominance Provisions (2001): “The Bureau considers that elements of ‘substantially or completely control’ or ‘dominance’ as it is commonly referred to, to be synonymous with market power. … the Bureau collects evidence and assesses a number of qualitative and quantitative factors … However, the Bureau places the greatest emphasis on the key factors of market share and barriers to entry.”
Competition Bureau, Merger Enforcement Guidelines (2004): “Barriers to entry affect the timeliness, likelihood and sufficiency of entry. They can take many forms, ranging from absolute restrictions that preclude entry and other factors that raise cost and risks associated with entry and thereby deter it.”
See also Canada (Director of Investigation and Research) v. NutraSweet Co. (1990), 32 C.P.R. (3d) (Comp. Trib.): “While this (the ability to set prices above the competitive level) is a valid conceptual approach, it is not one that can be readily applied; one must ordinarily look to the indicators of market power such as market share and barriers to entry. The specific factors that need to be considered in evaluating control will vary from case to case.
In NutraSweet, Laidlaw, Nielsen and Tele-Direct, the Tribunal held that market share, together with barriers to entry, will typically be sufficient to support a finding of market power (and conversely, in the absence of barriers to entry, firms with high market shares cannot exercise market power – Tele-Direct) (Canada (Director of Investigation and Research) v. NutraSweet Co. (1990), 32 C.P.R. (3d) (Comp. Trib.); Canada (Director of Investigation and Research) v. Laidlaw Waste Systems Ltd. (1992), 40 C.P.R. (3d) 289 (Comp. Trib.); Canada (Director of Investigation and Research) v. The D & B Companies of Canada Ltd. (1995), 64 C.P.R. (3d) 216 (Comp. Trib.) (Nielsen); Canada (Director of Investigation and Research) v. Tele-Direct (Publications) Inc. (1997), 73 C.P.R. (3d) 1 (Comp. Trib.)).
The Commissioner of Competition v. CCS Corporation et al., 2012 Comp. Trib. 14 (Comp. Trib.) [citing Director of Investigation and Research v. Hillsdown Holdings (Canada) Ltd. (1992), 41 C.P.R. (3d) 289]: “The conditions of entry into a relevant market can be a decisive factor in the Tribunal’s assessment of whether a merger is likely to prevent or lessen competition substantially. This is because, ‘[i]n the absence of significant entry barriers it is unlikely that a merged firm, regardless of market share or concentration, could maintain supra-competitive pricing for any length of time.’”
See also the definitions of Abuse of Dominance, Merger and Market Power.
Office of the Privacy Commissioner, Guidelines, Privacy and Online Behavioural Advertising: “Online behavioural advertising involves tracking consumers’ online activities, across sites and over time in order to deliver advertisements targeted to their inferred interests. Behavioural advertisers often use sophisticated algorithms to analyze the collected data, build detailed personal profiles of users, and assign them to various interest categories. Interest categories are used to present ads defined as relevant to users in those categories. While advertising may help subsidize the delivery of free online content desired by most users, it is nevertheless essential that online advertising practices respect an individual’s privacy rights and consent choices. Online behavioural advertising may be considered a reasonable purpose under the Personal Information Protection and Electronic Documents Act (PIPEDA), provided it is carried out under certain parameters, and is not made a condition of service for accessing and using the Internet, generally.”
Merger remedies are usually thought of as one of three types: (i) structural, (ii) behavioural or (iii) combination. In contrast to structural remedies that typically involve the sale (divestiture) of assets, behavioural remedies involve altering the merged entity’s conduct to prevent a substantial lessening of competition from occurring in a market.
The Bureau gives several examples of potential behavioural remedies that may support a structural remedy in its Information Bulletin on Merger Remedies in Canada (2006): “short-term supply arrangements for the buyer of the asset(s) to be divested … the provision of technical assistance to help a buyer or licensee train employees in complex technologies … a waiver by the merged entity of restrictive contract terms that lock-in customers for long periods of time. … codes of conduct, which can be readily monitored and expeditiously enforced by a third party …” The Bureau’s position is that it will seldom accept standalone behavioural remedies.
Information Bulletin on Merger Remedies in Canada (2006): “Standalone behavioural remedies are seldom accepted by the Bureau. It is difficult to design a behavioural remedy that will adequately replicate the outcomes of a competitive market. Even if such a remedy can be designed in clear and workable terms, it is likely to be less effective and more difficult to enforce than a structural remedy. Moreover, any attempt to provide for a standalone behavioural remedy usually imposes an ongoing burden on the Bureau and market participants, including the merged entity, rather than providing a permanent solution to a competition problem. Standalone behavioural remedies may be acceptable when they are sufficient to eliminate the substantial lessening or prevention of competition arising from a merger, and there is no appropriate structural remedy. Additionally, as stated previously, standalone behavioural remedies must require either no or minimal future monitoring by the Bureau, and be enforceable by either the Bureau or the Tribunal. Otherwise, the Bureau will neither agree to such remedies nor seek to impose them.”
Competition Bureau, in OECD, Policy Roundtables, Paper, Remedies in Merger Cases (2011): “Standalone behavioural remedies are seldom accepted by the Bureau because of difficulties associated with their design and implementation. These remedies are typically more difficult to enforce than structural remedies and generally impose an ongoing burden on the Bureau and market participants. Additionally, the Bureau has found that standalone behavioural remedies rarely provide a permanent solution to the competition concern(s) they are designed to address. The Bureau will consider the use of standalone behavioural remedies only in cases where the remedy is sufficient to eliminate the identified substantial lessening or prevention of competition arising from a merger and there is no appropriate structural remedy available. In such instances, the Bureau will only agree to a standalone behavioural remedy when it is certain that the remedy will require either no or minimal future monitoring by the Bureau and it will be enforceable by either the Bureau or the Tribunal.”
OECD, Policy Roundtables, Paper, Remedies in Merger Cases (2011): “Remedies are used by competition agencies to resolve and prevent the harm to the competitive process that may result as a consequence of a merger. They allow for the approval of mergers that would otherwise have been prohibited, by eliminating the risks that a given transaction may pose to competition. As such, they play an essential role in the merger review process, and their careful crafting is of the utmost importance to the competition agencies carrying out the review. Merger remedies are generally classified as either structural, if they require the divestiture of an asset, or behavioural, if they impose an obligation on the merged entity to engage in, or refrain from, a certain conduct. Structural remedies may include both the sale of a physical part of a business or the transfer or licensing of intellectual property rights. They can be imposed either as a condition precedent to a merger, or their completion may be required within a certain period from the approval of the merger. Behavioural remedies, on the other hand, are always forward looking in that they consist of limits on future business behaviour or an obligation to perform a specific prescribed conduct for a given, sometimes considerable, period of time following the consummation of the merger. They often consist of non-discrimination obligations, firewall provisions or non-retaliation or transparency provisions or contracting limitations. … Behavioural remedies pose their own challenges. Often difficult to craft in order to capture all possible eventualities, they also require monitoring in order to ensure that the merged entity is adhering to them in the months and years following the consummation of the merger. Long lasting oversight of a company’s behaviour is something competition agencies typically are neither well-equipped nor entrusted to do. On the other hand, behavioural remedies offer clear advantages in vertical and conglomerate mergers, where structural remedies typically offer little help. In addition, they avoid the substantial disruption to the merging parties’ businesses that a divestiture would cause.”
See also definitions of “structural remedy” and “combination remedy”.
J. Thomas Rosch, Commissioner, Federal Trade Commission, “Antitrust Issues Related to Benchmarking and Other Information Exchanges”, Remarks before the ABA Section of Antitrust Law and ABA Center for Continuing Legal Education’s Teleseminar on Benchmarking and Other Information Exchanges Among Competitors” (May 3, 2011): “Benchmarking refers to the practice of a firm comparing its practices, methods, or performance against those of other companies. A benchmarking exercise can be a one-time event, such as a plant visit or seminar, or can be an on-going process, such as a hospital comparing its infection rate against peer hospitals on an annual basis. Benchmarking has obvious pro-competitive potential. It allows companies to learn about more efficient means of production and distribution, which can in turn lead to better and lower cost products for consumers. But benchmarking, like other forms of information exchange, can lead to tacit or even explicit collusion.”
OECD, Policy Roundtable, Market Definition (2012): “Bidding markets appear in a wide variety of forms. A common characteristic is that firms compete by submitting bids in response to tenders by buyers.”
Competition Act, subsection 47(1): “bid-rigging means (a) an agreement or arrangement between or among two or more persons whereby one or more of those persons agrees or undertakes not to submit a bid or tender in response to a call or request for bids or tenders, or agrees or undertakes to withdraw a bid or tender submitted in response to such a call or request, or (b) the submission in response to a call or request for bids or tenders, of bids or tenders that are arrived at by agreement or arrangement between or among two or more bidders or tenderers, where the agreement or arrangement is not made known to the person calling for or requesting the bids or tenders at or before the time when any bid or tender is submitted or withdrawn, as the case may be, by any person who is a party to the agreement or arrangement.”
Some common types of bid-rigging include: (i) “cover” or “courtesy” bidding (some bidders submit bids that are too high to be accepted, or with terms that are unacceptable to the buyer, to protect an agreed upon low bidder), (ii) bid suppression (one or more bidders that would otherwise bid agree to refrain from bidding or agree to withdraw a previously made bid), (iii) bid rotation (all bidders submit bids but take turns being the low bidder according to a systematic or rotating formula), (iv) market division (suppliers agree not to compete in designated geographic areas or for specified customers) and (v) subcontracting (some bidders that agree not to submit a bid or submit a losing bid are awarded subcontracts or supply agreements from the successful agreed upon low bidder).
U.S. Department of Justice, Antitrust Division, Price Fixing, Bid Rigging, and Market Allocation Schemes: “Bid rigging is the way that conspiring competitors effectively raise prices where purchasers – often federal, state or local governments – acquire goods or services by soliciting competing bids. Essentially, competitors agree in advance who will submit the winning bid on a contract being let through the competitive bidding process. As with price fixing, it is not necessary that all bidders participate in the conspiracy.”
Competition Bureau, Pamphlet, Bid-Rigging: “What Is Bid-rigging? Have you ever wondered why two or more suppliers have submitted identical bids on one or more of your tenders? Are you curious as to why a particular supplier always submits the highest bid on your projects and the lowest one on someone else’s projects? Have you ever wondered why some of your tenders are bid at amounts much higher than the cost you estimated? Have you ever questioned why some likely suppliers bid on some projects and not on others? Are you aware of discussions among your suppliers about pricing or who should win a particular contract? If you answered ‘yes’ to any of these questions, you may be the victim of bid-rigging, which is a criminal offence under the Competition Act. Bid-rigging is an agreement where, in response to a call or request for bids or tenders, one or more bidders agree not to submit a bid, or two or more bidders agree to submit bids or to withdraw bids that have been prearranged among themselves. Bid-rigging is a serious crime that eliminates competition among your suppliers, increasing your costs and harming your ability to compete. Whether this occurs on government projects or in the private sector, these increased costs are ultimately passed on to the public. What Are the Possible Penalties? Bid-rigging is a criminal offence under Canada’s Competition Act. Firms and individuals convicted of bid-rigging face fines at the discretion of the court or imprisonment for up to fourteen years. The offence of bid-rigging is committed only if the parties to the agreement do not make the agreement known to the person requesting the bids or tenders before such bids or tenders are made.”
OECD, Guidelines for Fighting Bid Rigging in Public Procurement: Helping Governments to Obtain Best Value for Money (2009): “Bid rigging (or collusive tendering) occurs when businesses, that would otherwise be expected to compete, secretly conspire to raise prices or lower the quality of goods or services for purchasers who wish to acquire products or services through a bidding process. Public and private organizations often rely upon a competitive bidding process to achieve better value for money. Low prices and/or better products are desirable because they result in resources either being saved or freed up for use on other goods and services. The competitive process can achieve lower prices or better quality and innovation only when companies genuinely compete (i.e., set their terms and conditions honestly and independently). Bid rigging can be particularly harmful if it affects public procurement. Such conspiracies take resources from purchasers and taxpayers, diminish public confidence in the competitive process, and undermine the benefits of a competitive marketplace.”
One type of bid-rigging.
There are a number of types of bid-rigging that can contravene the criminal bid-rigging provisions of the Competition Act under section 47. These include “bid rotation”, where all parties submit bids, but take turns being the low bidder according to a systematic or rotating basis.
OECD, Recommendation of the Council on Fighting Bid Rigging in Public Procurement (2012): “In bid-rotation schemes, conspiring firms continue to bid, but they agree to take turns being the winning (i.e., lowest qualifying) bidder. The way in which bid-rotation agreements are implemented can vary. For example, conspirators might choose to allocate approximately equal monetary values from a certain group of contracts to each firm or to allocate volumes that correspond to the size of each company.”
One type of bid-rigging.
There are a number of types of bid-rigging that can contravene the criminal bid-rigging provisions of the Competition Act under section 47. These include “bid suppression”, where one or more bidders that would otherwise bid agree to refrain from bidding or withdraw a previously made bid.
OECD, Recommendation of the Council on Fighting Bid Rigging in Public Procurement (2012): “Bid-suppression schemes involve agreements among competitors in which one or more companies agree to refrain from bidding or to withdraw a previously submitted bid so that the designated winner’s bid will be accepted. In essence, bid suppression means that a company does not submit a bid for final consideration.”
Industry Canada, The Digital Economy in Canada: “The term ‘botnet’ refers to a collection of software robots, or ‘bots’, that operate undetected on a network of infected computers (commonly referred to as ‘zombies’). Computers can become infected in a number of ways, including: viruses sent as an attachment to a spam message; clicking on pop-up windows; or visiting an infected website. In the absence of security features such as firewalls or anti-virus programs, a computer can easily become compromised and users typically have no knowledge that their computer is operating as a zombie. Once established, botnets are controlled remotely by the originator and used for distributing all types of malware.”
CRTC: “Widely considered one of the biggest online threats today, a “botnet” is a network of computers infected by malicious software robots, or “bots”. The originator of the botnet, who is usually a spammer or criminal, controls the botnet remotely and automatically. Your computer can become compromised without your knowledge when, for example, you open an infected attachment in a spam e-mail, click on certain pop-up windows, or visit a booby-trapped website. Because of their ability to grow rapidly and without attracting attention, botnets threaten the stability of the Internet and online services.”
Government of Canada, Get Cyper Safe: “A collection of software robots, or ‘bots’, that creates an army of infected computers (known as ‘zombies’) that are remotely controlled by the originator.”
One economic theory as to why cartels form.
J.K. Ashton & A.D. Pressey, “Who Manages Cartels? The Role of Sales and Marketing Managers within International Cartels: Evidence from the European Union 1990-2009”: “The … ‘bounds’ approach to cartel analysis … examines the conditions required for the successful development and operation of cartels. This literature indicates certain market conditions consistent with cartel development such as over-capacity, declining prices, steady and adverse economic conditions … homogenous products, clearly defined markets, less powerful buyers and barriers to entry … These findings are also supported outside the field of economics. Criminologists often consider cartels as a corporate reaction to lagging performance resulting from factors such as an economic downturn … with the recent growth in the number of international cartels variously attributed to globalization and a reduction in trade barriers, … declining prices due to increased competition and higher detection rates due to increased resources afforded to antitrust regulators …”
A boycott, sometimes referred to as a “concerted refusal to deal”, is one of the most elusive terms in competition/antitrust law and has been treated under both per se and rule of reason standards of review by U.S. courts under the Sherman Act. In Canada, boycotts were generally treated as concerted refusals to deal under subparagraph 45(1)(c) of the Competition Act (prior to the 2009 amendments) and may fall under subparagraph 45(1)(c) of the amended Act (agreements between actual or potential competitors to restrict supply).
Competition Bureau, Advisory Opinion, “Applicability of the Collective Bargaining Exemption” (December 22, 1999): “In my view this article, if implemented as part of a collective agreement between the construction unions and construction employers would amount to a ‘group boycott’ involving a group of competitors at one level who attempt to protect themselves from competition from non-group members who seek to compete at that level. The hallmark of the group boycott is the effort of the competitors to barricade themselves from competition at their own level.”
Northwest Wholesale Stationers, Inc. v. Pacific Stationery & Printing Co., 472 U.S. 284 (1985): “’Group boycotts’ are often listed among the classes of economic activity that merit per se invalidation under § 1. Exactly what types of activity fall within the forbidden category is, however, far from certain. … Cases to which this Court has applied the per se approach have generally involved joint efforts by a firm or firms to disadvantage competitors by ‘either directly denying or persuading or coercing suppliers or customers to deny relationships the competitors need in the competitive struggle.’ In these cases, the boycott often cut off access to a supply, facility, or market necessary to enable the boycotted firm to compete, and frequently the boycotting firm possessed a dominant position in the relevant market. In addition, the practices were generally not justified by plausible arguments that they were intended to enhance overall efficiency and make markets more competitive. Under such circumstances the likelihood of anticompetitive effects is clear and the possibility of countervailing precompetitive effects is remote. Although a concerted refusal to deal need not necessarily possess all of these traits to merit per se treatment, not every cooperative activity involving a restraint or exclusion will share with the per se forbidden boycotts the likelihood of predominantly anticompetitive consequences.”
R. v. Nova Scotia Pharmaceutical Society (No. 3) (1993), 120 N.S.R. (2d) 304 (S.C.) (“PANS”): “Here, the Crown relies heavily on what it has termed ‘boycotts’, whereby the vast majority of participating pharmacies in the Province, on the direction and advice of the Society/Association and its committees, acted collectively in either terminating or providing notice of termination of their participation in a particular insurers’ direct-pay plan in order to bring that particular insurer (or insurers) in line with contractual terms or maximum allowable tariffs acceptable to the Society/Association and a vast majority of members.”
OECD, Glossary of Industrial Organisation Economics and Competition Law: “Firms marketing differentiated products frequently develop and compete on the basis of brands or labels. Coca Cola vs. Pepsi-Cola, Levi vs. GWG jeans, Kellogg’s Corn Flakes vs. Nabisco’s Bran Flakes are a few examples of inter-brand competition. Each of these brands may be preferred by different buyers willing to pay a higher price or make more frequent purchases of one branded product over another. Intra-brand competition is competition among retailers or distributors of the same brand. Intra-brand competition may be on price or non-price terms. As an example, a pair of Levi jeans may be sold at a lower price in a discount or specialty store as compared to a department store but without the amenities in services that a department store provides. The amenities in services constitute intra-brand non- price competition. Some manufacturers seek to maintain uniform retail prices for their products and prevent intra-brand price competition through business practices such as resale price maintenance (RPM), in order to stimulate intra-brand non- price competition if it will increase sales of their product.”
Consumer Protection BC: “Brand spoofing (aka phishing) happens when scammers create false website or send consumers e-mails or text messages from what appear to be well-known and trusted businesses. When a consumer provides information to these fake sources, scammers gain access to private information such as SIN numbers or bank PIN numbers.”
RCMP, E-mail Fraud / Phishing: “Phishing is a general term for e-mails, text messages and websites fabricated and sent by criminals and designed to look like they come from well-known and trusted businesses, financial institutions and government agencies in an attempt to collect personal, financial and sensitive information. It’s also known as brand spoofing.”
Competition Bureau, Updated Draft Enforcement Guidelines on the Abuse of Dominance Provisions (2009): “Similar to tying is bundling. Bundling can take two forms: pure bundling or mixed bundling. Pure bundling occurs when a firm requires a buyer to purchase more than one product in fixed proportions (for example, each unit of A is packaged with one unit of B). In the case of mixed bundling, buyers have the option of purchasing individual products separately, but can also purchase them together where the package is offered on more favourable terms than the sum of the individual items. Because bundling occurs in fixed proportions, it can be distinguished from tying, which usually covers most or all of a customer’s requirements for a product or products.”
A false or misleading claim can violate the general civil or criminal misleading advertising provisions of the Competition Act (sections 52 and 74.01) where it is made to promote a product (i.e., in the context of traditional advertising or marketing of products or services) or also “any business interest”. “Business interest” has been broadly interpreted by Canadian courts in misleading advertising cases.
See for example, Commissioner of Competition v. Yellow Pages Marketing, 2012 ONSC 927 (Ont. Sup. Ct.): “… the Competition Act refers to promoting ‘any business interest’ and not just sales. The phrase ‘business interest’ must be given a wide meaning and collecting money, and threats made in relation to collection efforts, constitute promotion of the respondents’ business interests.”
The Federal Court held in the Canada Pipe case that a valid business justification for a challenged practice could potentially offset, and provide an alternative explanation, for conduct that may otherwise be anti-competitive for the purposes of the abuse of dominance provisions of the Competition Act (under sections 78 and 79).
Competition Bureau, Enforcement Guidelines, The Abuse of Dominance Provisions: Sections 78 and 79 of the Competition Act (2012): “An additional factor in the determination of whether an act is anti-competitive is whether it was in furtherance of a legitimate business objective. A business justification is not a defence to an allegation that a firm has engaged in anti-competitive conduct, but rather an alternative explanation for the overriding purpose of that conduct, if and as required, that a firm can put forward where the Bureau believes that purpose to be anti-competitive. For such purposes, proof of the existence of some legitimate business purpose underlying the conduct is not sufficient. Rather, the Federal Court of Appeal has said that ‘a business justification must be a credible efficiency or pro-competitive rationale for the conduct in question, attributable to the respondent, which relates to and counterbalances the anti-competitive effects and/or subjective intent of the acts.’ Depending on the circumstances, this could include, for example, reducing the firm’s costs of production or operation, or improvements in technology or production processes that result in innovative new products or improvements in product quality or service. When assessing the overriding purpose of an alleged anti-competitive practice, the Bureau will examine the credibility of any efficiency or pro-competitive claims raised by the allegedly dominant firm(s), their link to the alleged anti-competitive practice, and the likelihood of these claims being achieved.”
Canada (Commissioner of Competition) v. Canada Pipe Co. (Federal Court of Appeal): “In 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. In essence, a valid business justification provides an alternative explanation as to why the impugned act was performed. To be relevant in the context of paragraph 79(1)(b), a business justification must be a credible efficiency or pro-competitive rationale for the conduct in question, attributable to the respondent, which relates to and counterbalances the anti-competitive effects and/or subjective intent of the acts.”
Competition Bureau, Report, Round Table on Monopsony and Buyer Power (2008): “The Canadian abuse provisions do not have an efficiency defence, but business justifications that are pro-competitive will be considered when assessing particular conduct. Such a justification can overcome the reasonably foreseeable effects of the conduct if the firm(s) can show that those anti-competitive effects were not the overall purpose of that conduct. The Bureau considers credible efficiency or pro-competitive rationales to generally fall into one of two categories: activities that minimise costs of production or operation, independent of the elimination or discipline of a rival; and activities that improve a firm’s product, service, or some other aspect of the firm’s business.”
Business-to-business (B2B) marketing.
Canadian Marketing Association, Code of Ethics and Standards of Practice: “Marketing products or services to other companies, government bodies, institutions and other organizations.”
“But for” test.
The third element of abuse of dominance under section 79 of the Competition Act is to show that a practice of anti-competitive acts “has had, is having or is likely to have the effect of preventing or lessening competition substantially” in a relevant market (market effects test).
The Federal Court of Appeal in the Canada Pipe case set out a “but for” test, as one possible test, for determining whether competition has been prevented or lessened substantially: “[W]ould markets — in the past, present or future — be substantially more competitive but for the impugned practice? Or, in other words, but for the impugned practice, would markets be characterized by greater price competition, choice, service or innovation than exists in the presence of this practice?”
Competition Bureau, Enforcement Guidelines, The Abuse of Dominance Provisions: Sections 78 and 79 of the Competition Act (September 20, 2012): “Demonstrating a substantial lessening or prevention of competition does not entail an assessment of whether the absolute level of competition in a market is substantial or sufficient, but rather a relative assessment of the level of competitiveness in the presence and absence of the impugned practice. In carrying out this assessment, the Bureau’s general approach is to ask whether, but for the practice in question, there would likely be substantially greater competition in the market in the past, present, or future. Generally speaking, a substantial lessening or prevention of competition creates, preserves, or enhances market power. A firm can create, preserve, or enhance market power by erecting or strengthening barriers to expansion or entry, thus inhibiting competitors or potential competitors from challenging the market power of that firm. In examining anti-competitive acts and their effects on entry barriers, the Bureau focuses its analysis on determining the state of competition in the market in the absence of these acts. If, for example, it can be demonstrated that, but for the anti-competitive acts, an effective competitor or group of competitors would likely emerge within a reasonable period of time to challenge the market power of the firm(s), the Bureau will conclude that the acts in question result in a substantial lessening or prevention of competition. A variety of other considerations, in addition to effects on entry and expansion, are relevant to the determination of whether there has been, or likely could be, a substantial lessening or prevention of competition, including whether, in the absence of the practice of anti-competitive acts, consumer prices might be substantially lower; product quality, innovation, or choice might be substantially greater; or consumer switching between products or suppliers might be substantially more frequent.”
Competition Bureau, Enforcement Guidelines, Competitor Collaboration Guidelines (2009): “A joint purchasing arrangement is an agreement between firms to purchase all or some of their requirements for a product from one or more suppliers. Such arrangements are often pro-competitive, as they permit firms to combine their purchases to achieve greater discounts from suppliers, and share delivery and distribution costs. However, joint purchasing agreements are agreements between parties that may be competitors in respect of the purchase of the products subject to the agreement. Accordingly, joint-purchasing arrangements can substantially lessen or prevent competition where, for example, purchasers agree to fix the price at which products will be purchased as an exercise of monopsony power. Joint purchasing arrangements can take several forms, including agreements to purchase products through a jointly controlled company, contractual arrangements between a group of firms and a supplier and buying groups.”
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