Canadian COMPETITION & ANTITRUST LAW

Hard core cartel. OECD, Report, Hard Core Cartels: Third Report on the implementation of the 1998 Council Recommendation (2005): “A ‘hard core cartel’ is an anticompetitive agreement, anticompetitive concerted practice, or anticompetitive arrangement by competitors to fix prices, make rigged bids (collusive tenders), establish output restrictions or quotas, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce.”  International Competition Network, Report, Defining Hard Core Cartel Conduct (2005): “The basic concepts of a cartel found in statutes and policy statements are nearly universal; a cartel is defined as an agreement between competitors to restrict competition. Further, the categories of conduct most often defined as “hard core” are also consistent: they are price fixing, output restrictions, market allocation, and bid rigging.”  See also OECD, Recommendations of the Council Concerning Effective Action Against Hard Core Cartels (1998).

Homogenous product. Competition Bureau, Merger Enforcement Guidelines (2011):  “[A product with] no unique physical characteristics or perceived attributes.”

Horizontal merger. Competition Bureau, Merger Enforcement Guidelines: “… mergers of firms that supply competing products (horizontal mergers) …”  OECD, Policy Roundtable, Vertical Mergers (2007): “A horizontal merger occurs when the products of the merging firms are in the same antitrust market, i.e., might exert a significant competitive restraint upon each other pre-merger.”  U.S. Federal Trade Commission, Guide to the Antitrust Laws: “There are two ways that a merger between competitors can lessen competition and harm consumers: (1) by creating or enhancing the ability of the remaining firms to act in a coordinated way on some competitive dimension (coordinated interaction), or (2) by permitting the merged firm to raise prices profitably on its own (unilateral effect).  In either case, consumers may face higher prices, lower quality, reduced service, or fewer choices as a result of the merger. … A horizontal merger eliminates a competitor, and may change the competitive environment so that the remaining firms could or could more easily coordinate on price, output, capacity, or other dimension of competition. As a starting point, the agencies look to market concentration as a measure of the number of competitors and their relative size.  Mergers occurring in industries with high shares in at least one market usually require additional analysis.”

Horizontal restraint. Antitrust Law Developments (5th), Volume I, p. 79: “Horizontal restraints consist of restrictions established by agreements among actual or potential competitors.  This is in contrast to vertical restraints, which involve restrictions imposed by a firm at one level of the market on firms at a different level (e.g., restrictions imposed by a manufacturer on its distributors).  Characterizing a restraint as horizontal or vertical can be critical, because horizontal restrictions are more likely than vertical restraints to be viewed as per se unlawful.”  Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717 at 730 (1988): “[r]estraints imposed by agreement between competitors have traditionally been denominated as horizontal restraints, and those imposed by agreement between firms at different levels of distribution as vertical restraints.” [Horizontal agreement]: OECD, Reviews of Regulatory Reform, Regulatory Reform in Canada, The Role of Competition Policy in Regulatory Reform (2002): “[Horizontal agreements] are those that prevent rivalry about the fundamental dynamics of market competition, price and output. Most contemporary competition laws treat naked agreements to fix prices, limit output, rig bids, or divide markets very harshly. To enforce such agreements, competitors may also agree on tactics to prevent new competition or to discipline firms that do not go along; thus, the laws also try to prevent and punish boycotts. Horizontal co-operation on other issues, such as product standards, research, and quality, may also affect competition, but whether the effect is positive or negative can depend on market conditions. Thus, most laws deal with these other kinds of agreement by assessing a larger range of possible benefits and harms, or by trying to design more detailed rules to identify and exempt beneficial conduct.”

Hub-and-spoke conspiracy.  Antitrust Law Developments (Fifth), Volume I, p. 24:  “In the paradigmatic case, a hub-and-spoke conspiracy involves a ringleader who is the dominant purchaser or supplier in the relevant market; this is the hub.  The hub  enters into a series of agreements with its distributors or suppliers, who are the spokes.  What makes the series of agreements an actionable conspiracy … is some set of facts that shows a connecting agreement among the horizontal competitors that form the spokes; this is the ‘rim’ of the wheel.”  Freshfields Bruckhaus Deringer, Global antitrust in 2012: 10 key themes: “Often in conjunction with RPM, several national European authorities are increasingly investigating potential hub-and-spoke theories of harm, where two horizontal competitors are alleged to collude through the intermediary of a common vertical relationship, typically a customer.”

Hypothetical monopolist test. One approach used by competition/antitrust enforcement agencies to define relevant markets.  Competition Bureau, Merger Enforcement Guidelines: “Conceptually, a relevant market is defined as the smallest group of products, including at least one product of the merging parties, and the smallest geographic area, in which a sole profit-maximizing seller (a “hypothetical monopolist”) would impose and sustain a small but significant and non-transitory increase in price (“SSNIP”) above levels that would likely exist in the absence of the merger.  In most cases, the Bureau considers a five percent price increase to be significant and a one-year period to be non-transitory. Market characteristics may support using a different price increase or time period. … The market definition analysis begins by postulating a candidate market for each product of the merging parties. For each candidate market, the analysis proceeds by determining whether a hypothetical monopolist controlling the group of products in that candidate market would profitably impose a SSNIP, assuming the terms of sale of all other products remained constant.  If the price increase would likely cause buyers to switch their purchases to other products in sufficient quantity to render the price increase unprofitable, the postulated candidate market is not the relevant market, and the next-best substitute is added to the candidate market.  The analysis then repeats by determining whether a hypothetical monopolist controlling the set of products in the expanded candidate market would profitably impose a SSNIP. This process continues until the point at which the hypothetical monopolist would impose and sustain the price increase for at least one product of the merging parties in the candidate market. In general, the smallest set of products in which the price increase can be sustained is defined as the relevant product market.”  U.S. Department of Justice and Federal Trade Commission, Horizontal Merger Guidelines (2010): “The Agencies employ the hypothetical monopolist test to evaluate whether groups of products in candidate markets are sufficiently broad to constitute relevant antitrust markets.  The Agencies use the hypothetical monopolist test to identify a set of products that are reasonably interchangeable with a product sold by one of the merging firms.  The hypothetical monopolist test requires that a product market contain enough substitute products so that it could be subject to post-merger exercise of market power significantly exceeding that existing absent the merger. Specifically, the test requires that a hypothetical profit-maximizing firm, not subject to price regulation, that was the only present and future seller of those products (“hypothetical monopolist”) likely would impose at least a small but significant and non-transitory increase in price (“SSNIP”) on at least one product in the market, including at least one product sold by one of the merging firms. For the purpose of analyzing this issue, the terms of sale of products outside the candidate market are held constant. The SSNIP is employed solely as a methodological tool for performing the hypothetical monopolist test; it is not a tolerance level for price increases resulting from a merger.”