Canadian COMPETITION & ANTITRUST LAW

Illegal lottery. In addition to complying with standalone promotional contest provisions in the federal Competition Act (section 74.06), promotional contests in Canada are regulated by illegal lottery provisions of the federal Criminal Code (sections 206 and 207).  While the relevant provisions of the Code are complex and somewhat archaic, in general an illegal lottery consists of: (i) a prize, (ii) chance and (iii) consideration.  See also Better Business Bureau (BBB) Code of Advertising: “No contest, drawing or other game of chance that involves the three elements of prize, chance and consideration should be conducted since it constitutes a [illegal] lottery …”  Based on the federal Criminal Code, promotional contest organizers often remove either the consideration element (e.g., a “no purchase necessary” entry option), the chance element (e.g., adding a skill element, for example making the contest a skill contest or including a skill-testing question), or both in order to remove a promotional contest from the scope of the illegal lottery provisions of the Code.

Immunity. Competition Bureau, Bulletin, Immunity Program under the Competition Act:  “A party implicated in criminal anti-competitive activity that may violate the Act may offer to co-operate with the Bureau and request immunity. …immunity refers to a grant of full immunity from prosecution under the [Competition Act].  Where a party does not qualify for immunity, but the party co-operates with the Bureau, the Bureau may recommend that the DPP grant some form of leniency.”

Immunity Plus. Under the Competition Bureau’s Leniency Program, persons that are not entitled to full immunity under the Bureau’s Immunity Program (for example, they are not “first in” to the Bureau, as required under the Bureau’s Immunity Program) may nevertheless be granted some level of leniency in penalties where they: (i) terminate their participation in the illegal conduct, (ii) agree to cooperate fully with the Bureau and prosecution and (iii) plead guilty.  Having said that, a leniency applicant may, nevertheless, be entitled to “Immunity Plus” status regarding a second newly-disclosed offence.  Competition Bureau, Bulletin, Leniency Program (2010): “If a leniency applicant discloses evidence of conduct constituting a further criminal offence under the Act unknown to the Bureau, the applicant may be eligible for Immunity Plus status.  If the leniency applicant meets the requirements set out in the Immunity Program regarding the newly-disclosed offence, the Bureau will recommend that the PPSC grant the applicant immunity from prosecution with respect to the newly-disclosed offence. In addition, for second-in and later leniency applicants, the Bureau will recommend that any individuals qualifying under the Leniency Program be afforded further lenient treatment in respect of the offence for which leniency is being sought. In recognition of the leniency applicant’s full cooperation in reporting the further offence, the Bureau will typically recommend that an additional five to 10 percent be added to the applicant’s leniency discount. … If a leniency applicant’s cooperation reveals that the scope of the initial cartel offence for which leniency is being sought is broader (e.g., in terms of the duration of the offence) than previously identified by or known from the Bureau’s investigation or from other cooperating parties, the Bureau will not use that information against the applicant when determining a leniency recommendation.”

Indirect and direct purchasers. Terms used in competition/antitrust class actions and in particular in reference to the level of harm (or “overcharge”) suffered by various levels of consumers in a supply chain from price-fixing conduct.  See e.g., Davies Ward Phillips & Vineberg, note, “Developments in Price-fixing Class Actions”: “’Direct purchasers’ are those who purchased the product in question directly from those involved in the alleged anti-competitive conduct.  ‘Indirect purchasers’ are those who purchased the product from intermediaries in transactions subsequent to the direct purchase …”

Infant industries.  OECD, Competition Assessment Toolkit (2011): “Infant industries are industries that may not be strong enough to survive open competition.”

Information exchange. OECD, Policy Roundtable, Information Exchanges Between Competitors Under Competition Law (2010): “Exchanges of information are interactions among competitors that, from a competition law perspective, fall between the universally condemned hard-core “naked” cartels and tacit collusion arising from oligopolistic interdependence, generally considered legal. In the course of doing business, companies can – and often do – exchange various types of information through different channels, which leads to increased transparency in the market which can both bolster allocative and productive efficiencies as well as facilitate collusive outcomes among competitors.  Generally, information exchanges among competitors may fall into three different scenarios under competition rules: (i) as a part of a wider price fixing or market sharing agreement whereby the exchange of information functions as a facilitating factor; (ii) in the context of broader efficiency enhancing cooperation agreements such as joint venture, standardization or R&D agreements; or (iii) as a stand-alone practice, whereby the exchange of information is the only cooperation among competitors.  The competition assessment of information exchanges in the first two scenarios is relatively straightforward. Competition agencies assess the possible restrictive effects of such practices in the broader context of the cartel or the agreement to which they are ancillary. The stand-alone exchange of information raises, however, significant challenges as it is crucial to recognize whether it resembles more a cartel-type infringement or an efficiency enhancing cooperation. This is ever more important in the context of the steadily increasing anti-cartel enforcement activity, as a result of which fully-fledged explicit cartel agreements are giving way to looser and more insidious ways of collusive cooperation among competitors.  Generally, competition laws of different jurisdictions around the world do not have specific provisions dealing with exchanges of information. Instead, these are dealt within the framework of traditional prohibitions against cartel agreements and/or concerted practices. However, this may pose particular challenges depending on the elements which need to be proven.”

Informant. ICN, Anti-cartel Enforcement Manual (March, 2010): “A person who volunteers information to an agency about cartel conduct. He/she would typically have specific knowledge of, or material information about, a cartel, and may be a participant in the cartel. An informant’s decision to come forward and disclose the existence of the particular cartel often risks his/ her continued employment, status and/or reputation within a particular organisation and/or industry. As such, an informant would normally require some guarantee of confidentiality and/or anonymity.  In some circumstances, informants may (subject to the laws of a particular jurisdiction) be willing to work undercover on behalf of an agency inside an active cartel and provide information as a witness during the course of the investigation and provide a witness statement.”

Inquiry.  The Competition Bureau can conduct informal or formal investigations of potential violations of the Competition Act.  Where the Bureau intends to conduct a formal investigation of a matter, it will commence an “inquiry”.  Under section 10 of the Competition Act, the Commissioner of Competition is required to commence an inquiry where: (1) a “six resident complaint” is made under section 9 of the Act (and the application formalities under that section are satisfied), (2) the Commissioner has “reason to believe” that (a) a person has violated an order under the Act, (b) grounds exist to make an order under Parts VII.1 or VIII of the Act (deceptive marketing and reviewable matters) or (c) an offence under Parts VI or VII has been (or is about to be) committed (criminal offences) or (3) where the Minister of Industry directs that an inquiry be commenced.  The significance of the Bureau commencing an inquiry is that once initiated, the Bureau has a number of enforcement powers available to it including obtaining section 11 orders (compelling an oral examination, the production of records and/or a written return under oath), wire-taps or search warrants (which can be obtained in relation to both criminal offences and civil “reviewable matters” under the Competition Act).

Intellectual property laws. Competition Bureau, Intellectual Property Enforcement Guidelines (2000): “Intellectual property laws create legally enforceable private rights that protect to varying degrees the form and/or content of information, expression and ideas. The primary purpose of these laws is to define the scope of these rights and determine under what circumstances they have been infringed upon or violated. By protecting exclusive rights, the IP laws provide an incentive to pursue scientific, artistic and business endeavors which might not otherwise be pursued.”  Intellectual property rights are provided for in Canada by the following federal statutes: the Trade-marks Act, Copyright Act, Patent Act, Industrial Design Act, Integrated Circuit Topography Act and Plant Breeders’ Rights Act.  Various sections of the federal Competition Act are relevant to the exercise of IP rights including section 32 (special remedies relating to the exercise of IP rights), subparagraph 76(3)(c) (application of the resale price maintenance provisions to the exercise of IP rights) and subsection 79(5) (an exception to the abuse of dominance provisions for the mere exercise of IP rights).  The application of the Competition Act to the exercise of IP rights is, however, highly complex and largely untested in Canada, other than some limited case law under the conspiracy (section 45), refusal to deal (section 75) and abuse of dominance (sections 78 and 79) provisions.  The Competition Bureau’s Intellectual Property Enforcement Guidelines (2000) is the Bureau’s leading statement on its enforcement position with respect to the exercise of IP rights. See also Competition Bureau, paper, “The Competition/Intellectual Property Interface – Present Concerns and Future Challenges” (2007); Competition Bureau, Competitor Collaboration Guidelines (2009). See also the following cases: Eli Lilly v. Apotex (conspiracy); Danaher/MDS; BASF/Ciba Holdings; Dow Chemical/Rohm and Hass Company; Shering-Plough/Organon; Akzo Nobel/Imperial Chemical Industries (mergers); NutraSweet; Tele-Direct; Interac; CREA; TREB (abuse of dominance); and Warner (refusal to deal).

Interlocking directorate. The Competition Bureau considers, among other things, whether an “interlocked director” has the ability to “materially influence” the economic behavior of another firm in a merger (the Competition Act defines “merger” to include acquisitions of a “significant interest”, which the Bureau interprets as the ability to “materially influence the economic behavior of the target business”).  Competition Bureau, Merger Enforcement Guidelines:  “[a]n interlocking directorate may arise where a director of one firm is an employee, executive, partner, owner or member of the board of directors of a second firm, or has another interest in the business of the second firm. An interlocking directorate is generally of interest under section 92 of the Act only when the interlocked firms are competitors, are vertically related, or produce complementary or related products. … When assessing whether an interlocked director has the ability to materially influence the economic behaviour of the interlocked firm(s), the Bureau’s focus is typically on the access that an interlocked director has to confidential information, and on the director’s voting and veto rights in the context of the board composition, quorum and voting rules, including attendance and historical voting patterns.”

Internal do not contact list. Canadian Marketing Association, Code of Ethics and Standards of Practice: “A list of current customer, consumer or business contact information of those persons or businesses who have requested that they not be contacted by the marketer’s organization.  It is used to cross-reference and purge that information from any list to be used for any marketing campaign by that organization.  Often referred to as an ‘internal deletion list’, this Code requires that internal do not contact lists must be maintained by every organization that markets for every channel by which they market and that the information must be retained on the list for three years.”