Canadian COMPETITION & ANTITRUST LAW

Economic torts.  In private civil actions under the Competition Act, “economic torts” are commonly plead together with allegations of breaches of the Competition Act.  These include unlawful interference with economic relations, common law conspiracy, unlawful interference with contractual relations and inducing breach of contract.

Economies of scale.  OECD, Competition Assessment Toolkit (2011): “these arise when the overhead costs are high. Allowing for a greater scale of production leads to lower average costs per unit produced. For example, permitting larger retail stores may allow firms to reap economies of scale and have lower unit cost of providing services.”

Economies of scope.  OECD, Competition Assessment Toolkit (2011): “where it is less costly for one firm to produce the different products or services as compared to the products being produced by separate specialized firms. For example, from a cost-efficiency standpoint, it would be efficient to allow a grocery store to sell over-the-counter medication due to cost-savings that arise from common marketing, storage and supplier contracts as opposed to regulations forcing a separation between pharmacies and grocery stores.”

Efficiencies defence. The Competition Act provides efficiencies exceptions under the merger (section 92) and civil agreements (section 90.1) provisions of the Act, where a merger (or agreement between competitors) has brought about, or is likely to bring about, efficiency gains that will be greater than and will offset the effects of any prevention or lessening of competition that will result (or likely result) from the merger (or agreement) and that such efficiency gains would not likely be achieved if a Tribunal order were made.  See subsections 96(1) and 90.1(4).  See also Competition Bureau, Enforcement Guidelines, Competitor Collaboration Guidelines (2009).

Elastic. Product market definition may be based on either direct (i.e., statistical) or indirect information or factors.  Demand “elasticity” is one type of direct information that can be used to consider whether two products are in the same product market, which essentially considers whether and to what extent consumers switch between between products as a result of price changes.  Competition Bureau, Merger Enforcement Guidelines (2004): “When detailed data on the prices and quantities of the relevant products and their close substitutes are available, statistical measures may be used to define relevant product markets. Demand elasticities indicate how buyers change their consumption of a product in response to changes in the product’s price (own-price elasticity) or in response to changes in the price of another identified product (cross-price elasticity). While cross-price elasticities do not in themselves directly measure the ability of a firm to raise price, they are particularly useful when determining whether differentiated products are close substitutes for one another and whether such products are part of the same relevant market.”  Product market definition may also be analyzed through the use of so-called “indirect factors”, which may include the views, strategies and behaviour of buyers, parties’ internal documents (e.g., merging parties’ views of the relevant market(s) and competition) and functional indicators (e.g., end use, physical or technical characteristics and price relationships).

Essential facilities doctrine. OECD, Policy Roundtables, The Essential Facilities Concept (1996): “The term ‘essential facilities doctrine’ originated in commentary on United States antitrust case law and now has multiple meanings, each having to do with mandating access to something by those who do not otherwise get access.  The variations in definitions are great. … An ‘essential facilities doctrine’ (EFD) specifies when the owner(s) of an ‘essential’ or ‘bottleneck’ facility is mandated to provide access to that facility at a ‘reasonable’ price.  For example, such a doctrine may specify when a railroad must be made available on ‘reasonable’ terms to a rival rail company or an electricity transmission grid to a rival electricity generator.  The concept of ‘essential facilities’ requires that there be two markets, often expressed as an upstream market and a downstream market. … Typically, one firm is active in both markets and other firms are active or wish to become active in the downstream market.  … A downstream competitor wishes to buy an input from the integrated firm, but is refused.  An EFD defines those conditions under which the integrated firm will be mandated to supply.”  ICN, Report on the Analysis of Refusal to Deal with a Rival Under Unilateral Conduct Laws (2010): “In virtually all jurisdictions, the question of essential facilities arises when an undertaking that controls or owns a facility refuses to provide access to other undertakings allegedly to gain a competitive advantage in another market. Agencies consistently identified the principal common elements of an essential facility as: (1) access to the facility must be essential to reach customers; and (2) replication or duplication of the facility must be impossible or not reasonably feasible.”

Evaluative factors.  Section 93 of the Competition Act contains a non-exhaustive list of evaluative factors that the Competition Tribunal may consider in determining whether a merger will prevent or substantially lessen competition.  These factors include: (i) the extent of foreign competition, (ii) whether a party has failed or is likely to fail (sometimes referred to as the “failing firm” defense), (iii) existing substitutes, (iv) barriers to entry, (v) effective remaining competition, and (vi) and whether a vigorous competitor would be removed (sometimes referred to as a “maverick”).  Specific circumstances aside, the most important of these factors are typically substitutes, barriers to entry and effective remaining competition. These factors are also typically used by the Bureau and counsel when evaluating the potential competitive effects of proposed transactions.  See e.g., Competition Bureau, Merger Enforcement Guidelines.

Exclusive dealing. Competition Act, subsection 77(1): “(a) any practice whereby a supplier of a product, as a condition of supplying the product to a customer, requires that customer to (i) deal only or primarily in products supplies by or designated by the supplier or the supplier’s nominee, or (ii) refrain from dealing in a specified class or kind of product except as supplied by the supplier or the nominee, and (b) any practice whereby a supplier of a product induces a customer to meet a condition set out in subparagraph (a)(i) or (ii) by offering to supply the product to the customer on more favourable terms or conditions if the customer agrees to meet the conditions set out in either of those subparagraphs.”