Conservative Justice and Public Safety Ministers Rob Nicholson and Vic Toews are asking Senators to “expeditiously” approve the Bill.

Bill C-10, which completed second reading in the Senate in December, would, among other things, eliminate conditional sentences of two years or less (i.e., sentences served in the community rather than a correctional facility) from being ordered by courts for violation of two of the core criminal offences under the Competition Act: criminal conspiracy agreements (section 45) and bid-rigging agreements (section 47).

This would be achieved by amending section 742.1 of the Criminal Code to restrict the availability of conditional sentences for all offences for which the maximum term of imprisonment is 14 years or life (and for specified offences, prosecuted by way of indictment, for which the maximum term of imprisonment is 10 years).

Both sections 45 (criminal conspiracy agreements, including price-fixing and market division/allocation agreements between competitors) and 47 (bid-rigging) of the Competition Act are indictable offences, subject to maximum terms of imprisonment of 14 years (increased as a result of recent amendments to the Competition Act in 2009 and 2010).

Given that the Competition Act has been amended to significantly increase the penalties for criminal conspiracy offences (and lower the enforcement bar by removing the former competitive effects test – see: Competition Act amendments), Bill C-10 will, if enacted, further increase the potential risk for individuals violating these key criminal offences under the Act.

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For more about the criminal conspiracy rules in Canada and our services see:

Conspiracy (Cartels)

Hakemi & Company

The National Competition Law Section of the Canadian Bar Association will be holding a teleconference on February 29, 2012 entitled: “Criminal Conspiracy or Legitimate Competitor Collaboration?  Tips for In-House Counsel”

From the Canadian Bar Association:

“Authorities have recently noted their first conviction under Canada’s amended conspiracy law, commenting: “[This investigation] highlights the Bureau’s reinvigorated mandate to stop consumer harm caused by price-fixing, and to secure significant fines for these serious criminal offences.” 

In-house counsel practising competition law are often asked to evaluate the competition law risks associated with activities such as joint selling initiatives, joint ventures, buying groups, participation in trade associations, and merger transactions.  As such, in-house counsel are an organization’s first line of defence to identify potential illegal arrangements to fix prices, allocate markets or restrict output, that create risks of criminal investigation and prosecution; and that can result in significant fines, imprisonment, damage to an organization’s reputation, and civil damage claims.

The line between criminal conspiracies and pro-competitive strategic alliances among competitors, however, can at times be difficult to detect. It is critical that in-house counsel have the tools necessary to distinguish benign or pro-competitive activity from potentially criminal conduct.”

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For more about this teleconference see:

Criminal Conspiracy or Legitimate Competitor Collaboration?  Tips for In-House Counsel

For more about Canada’s amended conspiracy laws and our compliance services see:

Conspiracy (Cartels)

Competition Law Compliance Programs

Hakemi & Company

In particular, according to media reports, Rogers is arguing that the civil “performance claim” provision of the Competition Act is contrary to the freedom of expression rights under the Charter and that the penalties for civil misleading advertising are unconstitutional.

In addition to “general misleading advertising” provisions, the Competition Act also prohibits or regulates a variety of other advertising and marketing conduct, including performance claims that are not based on an “adequate and proper test” made before the claim is made.

Over the past few years the Bureau has challenged a fairly wide variety of performance based advertising claims including claims relating to gas saving devices, spas and recently weight loss claims made by Nivea’s Canadian distributor in relation to some Nivea products (see: Competition Bureau Requires Maker of Nivea to Reimburse Customers for Misleading Claims).

The penalties for civil misleading advertising were also recently increased (see: Canada’s Competition Act Amendments), with maximum “administrative monetary penalties” or “AMPs” (essentially civil fines) of up to $10 million for corporations, which has led to speculation as to whether these significant penalties would be subject to constitutional challenge as essentially penal in nature, without the accompanying procedural protections available for criminal offences.

The Rogers case is the first case to challenge the constitutionality of these AMPs recently introduced for misleading advertising.

This case arose based on concerns from several new entrant cell phone companies, including Wind Mobile, that Rogers was engaging in false performance claims relating to its Chatr cell phone brand, including claims that Chatr had “fewer dropped calls than new wireless carriers.”

The Bureau’s position has been that Rogers’ performance claims were both unsubstantiated and could not be substantiated because, for example, the new entrant carriers did not disclose dropped call rates (see: Competition Bureau Takes Action Against Rogers Over Misleading Advertising).

While Rogers’ recent constitutional arguments are interesting, their success is uncertain given, among other things, that a great many of the constitutional challenges to the Competition Act in the past have failed.

This case will, however, regardless of its outcome, prove to be one of the early tests of Canada’s amended Competition Act.

In making the announcement, the Bureau said:

“’Yesterday’s guilty plea is the first conviction under Canada’s amended conspiracy law,’ said Melanie Aitken, Commissioner of Competition. ‘This investigation highlights the Bureau’s reinvigorated mandate to stop consumer harm caused by price-fixing, and to secure significant fines for these serious criminal offences.’

The charges are the first to arise from the Bureau’s investigation into price-fixing cartel in the polyurethane foam industry. Anyone with information relating to this investigation is encouraged to contact the Competition Bureau.

The Bureau’s investigation benefitted from cooperation under the Bureau’s Immunity and Leniency Programs, which create incentives for parties to address their criminal liability by cooperating with the Bureau in its ongoing investigation and prosecution of other alleged cartel participants.

Under the Competition Act, an agreement between competitors to fix prices, allocate markets or restrict output in Canada is a criminal offence. In March 2010, amendments to the conspiracy provision of the Act came into force.”

Canada’s amended criminal conspiracy provision (section 45 of the Competition Act) makes price-fixing, market division/allocation and output/supply restriction agreements between competitors illegal and subject to penalties of up to $25 million (per count), imprisonment for up to 14 years, or both.

In recent public remarks, the Commissioner has indicated a desire to bring new cases under the amended conspiracy offence provisions of the Act – see for example Commissioner of Competition, Keynote Speech at the Canadian Bar Association 2011 Fall Conference, where the Commissioner said:

“In our Criminal work, we continue to concentrate on the, admittedly, lengthy process of ‘changing the game’— reorienting our approach at the Bureau, our processes, and our mindset to a more appropriately aggressive stance to respond, as we must, to our new more powerful criminal provisions.

As we move forward with our new criminal regime, consistency, consistency, and consistency is our focus.

There will be no arbitrary relaxing of standards under the Bureau’s watch — a practice that can only impair predictability and fairness in enforcement. Further, we will use our investigative tools such as searches, wiretaps and section 11 orders.

Cartels and bid–rigging continue to be our focus, given the seriousness of this conduct, and its unambiguously harmful nature. We are committed to advancing cases that matter to Canadians, doing so in a timely manner, and following them through to the end.

For cartels, while it will necessarily take some time before we bring our first case under the new section 45, we do have a number of ‘hybrid’ cases underway that will give us experience with the new provisions.”

See also: Commissioner of Competition Addresses Current Enforcement Priorities in Two Wide-ranging Talks.

Whereas before March, 2010 Canada’s conspiracy offences required a competitive effects test to be proven (i.e., that an agreement prevented or lessened competition “unduly”), this is no longer required and proof of an agreement between competitors alone is sufficient to establish a conspiracy under section 45 (see: Conspiracy (Cartels) and Competition Act amendments).

According to the Bureau, it relied on both its formal Immunity and Leniency Programs in this case, under which applicants may obtain full immunity from prosecution (or reductions in penalties) where they satisfy all elements of the Bureau’s Programs (see: Competition Bureau Immunity Program, Competition Bureau Leniency Program and Immunity & Leniency).  The Bureau also relied on wiretaps, search warrants and cooperation with international enforcement agencies as part of its investigation.

The Bureau also indicates that the price-fixing agreement in this case may have involved both identical pricing and price increase ranges for the supply of polyurethane foam.  In this regard, the definition of “price” under section 45 of the Competition Act is very broad and includes discounts, rebates, allowances or price concessions.  The Bureau has also taken the position in its Competitor Collaboration Guidelines that price-fixing agreements include all “agreements between competitors to fix or control the price, or any component of the price, to be charged by competitors”:

“In the Bureau’s view, [price-fixing agreements include] agreements to fix prices at a predetermined level, to eliminate or reduce discounts, to increase prices, to reduce the rate or amount by which prices are lowered, to eliminate or reduce promotional allowances and to eliminate or reduce price concessions or other price-related advantages provided to customers. For paragraph 45(1)(a) to apply, the agreement need not establish an actual price for the relevant product; rather, this section also prohibits agreements between competitors on methods of establishing prices or other indirect forms of agreements to fix or increase the price paid by customers. Such price-fixing agreements could include agreements between competitors to use a common price list in their negotiations with customers, agreements to apply specific price differentials between grades of products, agreements to apply a pricing formula or scale and agreements not to sell products below cost. In addition, the Bureau interprets paragraph 45(1)(a) as applying to agreements between competitors on a component of a price, such as a surcharge or credit terms.”

The Bureau’s investigation is ongoing.

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For more see:

Conspiracy (Cartels)

Competition Bureau Sends Signal to Price-Fixers with $12.5 Million Fine

Competition Bureau Backgrounder – Polyurethane Foam

Developments in 2011 include new cases, enforcement and legislation in most key areas including abuse of dominance (the Competition Bureau’s ongoing challenge of The Toronto Real Estate Board and CREA settlement in late 2010), criminal conspiracy (developments in price-fixing class action litigation and some Bureau enforcement), refusal to deal (several important private access section 75 cases, including a decision of the Federal Court of Appeal), contested mergers (in the waste and airline markets), price maintenance (the merchant fees case involving Visa and MasterCard) and misleading advertising (involving Bell Canada, Rogers and others).

The Competition Bureau is testing the new rules under Canada’s Competition Act, which came into force in 2009 and 2010, and private plaintiffs are creating new law in a number of ongoing competition/antitrust class actions in Canada (principally indirect purchaser price-fixing cases relating to the sale and supply of dynamic random access, or “DRAMs”, high fructose corn syrup and computer operating systems).

At the same time, several new pieces of legislation have been introduced including a federal omnibus crime bill, which will eliminate conditional sentences for some competition law offences, and sweeping new anti-spam legislation (Bill C-28 or “FISA“) that once in force will be among the strictest anti-spam regimes in the world.

The Commissioner of Competition, and other federal enforcement officials including the RCMP, have also expressed intentions to adopt tougher enforcement stances in relation to competition law and other white collar crime.

In general, these developments mean that it remains important for Canadian companies, organizations and their executives to maintain a practical awareness of Canadian competition law.

Some of the key competition law and related developments of 2011 include:

New RCMP Commissioner Announces New “Tough Line” on White-collar Crime

The new head of the RCMP, Bob Paulson, who was named new RCMP Commissioner in November, has vowed to take a new “tough line on white-collar crime” (See: New RCMP head takes tough line on white-collar crime), particularly in relation to major fraud and securities law investigations.

This announcement follows a recent law enforcement trend by the Conservative government generally and key Canadian regulatory officials.  For example, an extensive federal omnibus crime bill was recently passed that will, among other things, significantly restrict conditional sentences (e.g., sentences served in the community for criminal offences) including for some criminal offences under the Competition Act.

Supreme Court of Canada Denies Leave in Refusal to Deal Case: Nadeau Poultry Farm v. Groupe Westco Inc.

On December 22, 2011, the Supreme Court of Canada, per Justices McLachlin, Rothstein and Moldaver, denied leave to appeal in Nadeau Poultry Farm Limited v. Groupe Westco Inc. (see: Supreme Court of Canada denies leave in Nadeau Poultry Farm v. Groupe Westco Inc. (December 22 2011)).  The applicant in this section 75 refusal to deal case under the Competition Act, Nadeau Poultry Farm, was seeking leave to appeal an earlier Federal Court of Appeal decision that affirmed a Competition Tribunal decision dismissing its application in 2009 (see: Federal Court of Appeal dismisses appeal in Nadeau Poultry Farm Ltd. v. Groupe Westco Inc.).

Federal Government Passes Omnibus Crime Bill (Bill C-10) – Eliminates Conditional Sentences for Cartel (Conspiracy) and Bid-rigging Offences

On December 5, 2011, a federal omnibus crime bill (Bill C-10) was passed that will, among other things, eliminate conditional sentences of two years or less from being ordered by courts for violation of two of the core criminal offences under the Competition Act: criminal conspiracy agreements (section 45) and bid-rigging (section 47).

Privacy Commissioner Issues New Online Behavioural Advertising (Tracking) Guidelines

On December 6, 2011, the federal Privacy Commissioner issued new online tracking guidelines for advertisers which, among other things, restrict the tracking of children and tracking technologies without an opt-out mechanism.

Federal Government Raises the Possibility of Amending Canada’s Foreign Investment Rules – Again

Bloomberg reported that the federal Minister of Industry has again raised the prospect of amending Canada’s Investment Canada Act in remarks made in New York (see: Canada Open to Changing Foreign-Takeover Law, Paradis Says).  The Industry Minister’s comments closely follow a recent C.D. Howe Institute report calling for fundamental changes to Canada’s foreign investment rules to stimulate foreign direct investment in Canada, including a change to the overarching test for foreign investment approval (replacing the current “net benefit to Canada” test with a national interest test) (see: New Publications – C.D. Howe Institute Report – Reforming the Investment Canada Act: Walk More Softly, Carry a Bigger Stick).

Canadian Supreme Court Grants Leave in Pro-Sys/Microsoft and Sun-Rype Indirect Purchaser Competition/Antitrust Class Actions

The Supreme Court of Canada, per Justices LeBel, Fish and Cromwell, granted leave to appeal in the Pro-Sys Consultants Ltd. v. Microsoft Corporation and Sun-Rype Products Ltd. v. Archer Daniels Midland Company cases.  These cases relate to conflicting indirect purchaser class action certification decisions in British Columbia (companion decisions of the British Columbia Court of Appeal) and Quebec (a recent decision of the Quebec Court of Appeal) (See: Quebec Court of Appeal rejects B.C. Court of Appeal passing-on defence decisions in Pro-Sys and Sun-Rype and British Columbia Court of Appeal allows Microsoft appeal in Pro-Sys v. Microsoft – creates de facto passing-on defence).

Commissioner of Competition Addresses Current Enforcement Priorities in Two Wide-ranging Talks

The Commissioner of Competition, Melanie Aitken, addressed current enforcement priorities in two engaging and wide-ranging talks recently in Vancouver: a keynote speech at a reception hosted by the University of British Columbia, National Centre for Business Law at the Four Seasons and a Vancouver Competition Policy Roundtable meeting organized by Professor Tom Ross of the Sauder School of Business.

Competition Bureau Has “Serious Concerns” About Potential Competitive Effects of TMX/Maple Transactions

The Bureau recently announced that it had “serious concerns” about the Maple Group’s bid to acquire the TMX Group:

“The Commissioner advised Maple and TMX Group that she has serious concerns about the likely competitive effects of the proposed transactions in the current environment, primarily in connection with equities trading and clearing and settlement services in Canada.

The Commissioner indicated that she has not reached a final conclusion and that her current views may be affected by further factual information and developments, which may include changes in the applicable securities regulatory regime, and any commitments or other remedial measures that Maple may be prepared to take to address her concerns.

Maple and TMX Group intend to continue to work closely with staff of the Competition Bureau to address the Commissioner’s concerns, including by identifying appropriate remedial measures. As Maple has stated previously, it is committed to working constructively with all of the relevant regulators, including Canadian securities regulators, to address any questions they may have so that the proposed transactions can proceed in the best interests of TMX Group, its shareholders and the Canadian capital markets. Maple and TMX Group continue to strongly believe that the proposed transactions will substantially benefit all capital market participants.”

(TMX News Release, November 29, 2011)

Madam Justice Simpson Proposes Reforms to the Competition Tribunal

In a short but interesting recent note, Madam Justice Sandra J. Simpson has proposed that changes be made to the federal Competition Tribunal, including wider powers for the Tribunal to decide references and award damages for abuse of dominance (monopolization).

Quebec Court of Appeal rejects BC Court of Appeal passing-on defence decisions in Pro-Sys and Sun-Rype

The Quebec Court of Appeal unanimously overturned the earlier 2008 Quebec Superior Court decision in Option Consommateurs v. Infineon Technologies AG, (the ongoing indirect purchaser “DRAMs” case) which had earlier denied a motion to commence class action proceedings.

Supreme Court of Canada Denies Leave in U.S. Steel Investment Canada Case

On November 24, 2011, the Supreme Court of Canada denied leave in United States Steel Corporation et al. v. Attorney General of Canada. See: Supreme Court of Canada Judgements. See also: National Post – Supreme Court Won’t Hear U.S. Steel Appeal.  This landmark Investment Canada Act dispute, between the Canadian Government attempting to enforce undertakings provided by U.S. Steel, has since been settled.

Competition Bureau Announces Quebec Sewer Services Bid-rigging Cartel

On November 22, 2011, the Competition Bureau announced that criminal charges had been laid against six companies and five individuals accused of rigging bids for provincial and municipal contracts for sewer services in Montreal (see: Competition Bureau Exposes Sewer Services Cartel in Quebec and Backgrounder – Competition Bureau Exposes Sewer Services Cartel in Quebec).  While the Bureau has yet to bring a section 45 conspiracy case under the amended conspiracy provisions of the Competition Act, it has been very active in bringing bid-rigging cases under section 47 of the Act.

C.D. Howe Institute Issues Report on Competition Bureau Enforcement and Strategic Alliances

On November 10, 2011, the C.D. Howe Institute issued a report reviewing the Competition Bureau’s enforcement of the criminal conspiracy offences of the Competition Act, enforcement efforts in relation to strategic alliances and policies regarding the issuance of binding advisory opinions.

Competition Tribunal Grants CREA Leave to Intervene in TREB Abuse of Dominance Case

On November 2, 2011, Madam Justice Simpson of the federal Competition Tribunal granted leave to Realtysellers and The Canadian Real Estate Association to intervene in the Bureau’s abuse of dominance (monopoly) case against The Toronto Real Estate Board.

CRTC and 12 International Enforcement Agencies Form International Do Not Call Network

The federal Canadian Radio-television and Telecommunications Commission announced that, together with the Australian Communications and Media Authority, it has assembled 12 international enforcement agencies to form an International Do Not Call Network.  See: CRTC announces creation of international network to facilitate cooperation on telemarketing enforcement.

Commissioner of Competition Speech Highlights Enhanced Competition Bureau Enforcement

On October 25, 2011, the Competition Bureau published the Commissioner’s speech given at the 2011 Canadian Bar Association’s Annual Competition Law Conference in Ottawa.  It is fair to say that the Commissioner’s recent speech presented a singular tone across the civil and criminal competition law areas: continued enhanced enforcement.

Ottawa Bid-rigging Case to Go to Trial

On October 5, 2011, the Ottawa Business Journal, Ottawa Citizen and Vancouver Sun reported that Ontario Justice Ann Alder ruled that an Ottawa bid-rigging case in the technology sector can go to trial.  In this case, the Competition Bureau alleged that a number of companies, including TGP Technology, Spearhead Management, The Devon Group, Brainhunter, Nortak Software and Tipacimowin Technology, rigged bids in relation to IT contracts totaling about $67 million issued by the Canada Border Services Agency, Department of Transport and Public Works (see: Competition Bureau Announces Charges Against Companies Accused of Rigging Bids for Government of Canada Contracts and Backgrounder).  Charges were also dismissed against several companies.

Competition Bureau Issues Updated Merger Enforcement Guidelines

On October 6, 2011, the Competition Bureau issued its updated Merger Enforcement Guidelines.  The Bureau’s new MEGs, which set out its approach to the substantive review of mergers in Canada, are the first update to the MEGs since 2004 and the result of public consultations in 2010 and 2011.

Telemarketer Receives Two-Year Prison Sentence

On October 3, 2011, the Competition Bureau announced that a deceptive telemarketer has been sentenced to two years in prison in relation to a deceptive telemarketing scheme relating to the sale of business directories (see: Deceptive Telemarketer Receives a 2-year Prison Sentence).

Competition Tribunal Grants Leave in Refusal to Supply Data Case

In a significant recent decision by the Competition Tribunal, the Tribunal granted leave to the Used Car Dealers Association of Ontario to make a section 75 refusal to deal application relating to a refusal by the Insurance Bureau of Canada to supply data to the UCDA.  This recent case, reasons for which were issued on September 9, 2011, is significant, in that the UCDA was seeking leave to make its application in light of a longstanding adverse decision – the Warner music case (which has stood as a barrier to invoking section 75 in relation to refusals to licence intellectual property).

Competition Bureau Negotiates Settlement with Canadian Distributor of Nivea Products over Allegedly Misleading Performance Claims

On September 7, 2011, the Competition Bureau announced that it had reached a settlement with Nivea’s Canadian distributor, Beiersdorf Canada Inc., relating to allegedly false or misleading performance claims in its advertising.  In particular, the Bureau took issue with claims that suggested that the use of skin cream could lead to weight loss.  Under the terms of the consent agreement negotiated with the Bureau, Beiersdorf has agreed to pay an “administrative monetary penalty” or “AMP” (essentially a civil fine) of Cdn. $300,000, refund Canadian customers and remove its products from Canadian shelves.

Competition Bureau Revisits its Self-regulated Professions Study After Four Years

On September 2, 2011, the Competition Bureau released its “ex-post assessment” of its 2007 Self-Regulated Professions Study (Self-regulated professions – Balancing competition and regulation (December, 2007)).  According to the Bureau, its new Study “surveys and assesses developments that have taken place relating to recommendations made in [its] 2007 Study” and “provides an overview of the progress made since 2007” to the earlier recommendations made by the Bureau.

Alberta Telemarketers Sentenced to Jail Time for Cross-border Deceptive Telemarketing Scheme

On August 30, 2011, the Competition Bureau announced that five individuals in Alberta were convicted and sentenced of deceptive telemarketing under the Competition Act.

Competition Bureau Issues New Merger Remedies Study

On August 11, 2011, the Competition Bureau issued a Merger Remedies Study, summarizing its review of the effectiveness of merger remedies negotiated in 23 Canadian merger cases between 1995 and 2005.  According to the Bureau, the results of its study will be used to revise its Information Bulletin on Merger Remedies in Canada first issued in 2006 (see: Information Bulletin on Merger Remedies in Canada) and its companion consent agreement outline template.

Ontario Used Car Dealers Association Attempts to Go Around Landmark Warner Decision in Data Refusal to Supply Case

In a very interesting refusal to supply case currently before the Competition Tribunal, the Used Car Dealers Association of Ontario sought leave from the Competition Tribunal for the re-supply by the Insurance Bureau of Canada of data used in one of the UCDA’s information products for members.

Montreal Company Pleads Guilty in Bid-rigging Case

On July 19^th 2011, the Competition Bureau announced that a Montreal company, Les Entreprises Promécanic Ltée, pleaded guilty to three charges of bid-rigging and was fined $425,000 for its alleged role in rigging bids in relation to residential highrise building ventilation contracts in Montreal.  According to the Bureau, the Montreal company admitted that it was involved in coordinating with competitors to pre-determine the outcome of bids. Interestingly, this case also included an internal compensation arrangement between the parties to the bid-rigging arrangement to ensure that contracts were awarded to the pre-arranged company.

The Competition Bureau’s Application to Block the Air Canada/United Continental Joint Venture – A Few Interesting Aspects

On June 27th 2011, the Competition Bureau announced that it would seek to block a proposed joint venture between Air Canada and United Continental which, according to the Bureau, would “monopolize ten important Canada/United States routes and substantially reduce competition on nine additional routes.”  This case is one of two contested merger cases recently brought by the Bureau, the first in six years, and will, among other things, test the new civil agreement provision of the Competition Act (section 90.1).

Bell Canada Agrees to Pay $10 Million Fine in Misleading Advertising Case

On June 28th, the Competition Bureau announced that Bell Canada has agreed to stop making allegedly misleading claims relating to the prices for its services and to pay an administrative monetary penalty or “AMP” (essentially a civil fine) of $10 million, the maximum penalty for misleading advertising under the Competition Act.

Maple Group Launches Cdn. $3.7 Billion Hostile Bid for TMX Group Inc.

On June 13, 2011, the Maple Group Acquisition Corp., a consortium of 13 Canadian financial institutions, launched a Cdn. $3.7 billion hostile bid to acquire 70% of the TMX Group Inc. for $48 per share.

Two More Individuals Plead Guilty in Quebec Price-fixing Case

On June 10, 2011, the Competition Bureau announced that two more individuals pleaded guilty in the Quebec gasoline price-fixing case to fix the price of gasoline at the pump in Quebec regional markets.

U.S. Federal Trade Commission Brings $450 Million Internet Fraud Case Against Alberta Online Operator

The U.S. Federal Trade Commission announced that it has filed a $450 million internet fraud civil suit against an Alberta online operator.

Competition Bureau Issues No Action Letter in TMX/LSE Deal

The Wall Street Journal reported that the Competition Bureau issued a no action letter in the proposed TMX Group Inc. / London Stock Exchange Group plc transaction.

Further Guilty Plea in Quebec Gasoline Price-fixing Cartel

The Competition Bureau announced that a further individual pleaded guilty and was fined in the Quebec gas price-fixing cartel.  In making the announcement, the Bureau said that Micheline Lapointe-Cabana, owner of a service station in Magog, Quebec operated under the Petro-Canada banner, was sentenced to personally pay a fine of $20,000.

Competition Bureau Files Abuse of Dominance Case Against the Toronto Real Estate Board

On May 27, 2011, the Competition Bureau commenced an abuse of dominance case against The Toronto Real Estate Board before the Competition Tribunal.

Competition Bureau Issues New Fee and Service Standards Handbook for Written Opinions

On May 18, 2011, the Competition Bureau issued its new Fee and Service Standards Handbook for Written Opinions to reflect the significant amendments to the Competition Act that came into force in 2009 and 2010 (see: Competition Bureau Updates Fee and Service Standards Handbook for Written Opinions).

Customer Allocation Conspiracy in the Refrigeration and Food Service Equipment Industry

The Competition Bureau announced that Kason Industries Inc. plead guilty for participating in a customer allocation conspiracy and was fined $250,000 by the Federal Court of Canada.

British Columbia Court of Appeal Allows Microsoft Appeal in Pro-Sys v. Microsoft

On April 15, 2011, the British Columbia Court of Appeal allowed Microsoft’s appeal in the Pro-Sys v. Microsoft class action case.  This important decision, in which the Court of Appeal dismissed the plaintiffs’ action and set aside the earlier class certification order, was issued concurrently with a second Court of Appeal judgment in Sun-Rype Products v. Archer Daniels.  These decisions are now subject to an appeal to the Supreme Court of Canada, based on the unsettled ability of indirect purchaser plaintiffs to commence competition/antitrust class actions in Canada.

Competition Bureau Announces New Size of Transaction Threshold for Mergers for 2011

The Competition Bureau announced that the pre-merger notification transaction-size threshold for 2011 will increase to $73 million (see: 2011 Pre-Merger Notification Transaction-Size Threshold).

Competition Bureau to Challenge Completed BC Landfill Merger

The Competition Bureau announced that it has applied to the Competition Tribunal for a Tribunal order to dissolve CCS Corporation’s acquisition of Complete Environmental Inc., owner of the proposed Babkirk Secure Landfill in Northeastern British Columbia (see: Competition Bureau Challenges BC Landfill Merger).  Final arguments were recently heard by the Tribunal in this merger to monopoly case which, together with the ongoing Air Canada / United Continental case, is one of two contested mergers, the first in Canada in six years.

Spa Retailers Out of Hot Water After Settlement with Bureau for Allegedly False Energy Savings Claims

The Competition Bureau announced that it reached a settlement with two spa retailers in relation to allegedly false energy savings claims (see: Spa Retailers Required to Stop Making False ENERGY Star Claims). According to the Bureau, the retailers made misleading representations incorrectly conveying the impression that their hot tubs or insulation met the criteria of the ENERGY STAR Program.

Canada Passes Federal Anti-Spam Legislation – Bill C-28 – the Fighting Internet and Wireless Spam Act

In late 2010, Canada passed new anti-spam legislation (Bill C-28) which will, once in force, be among the strictest anti-spam regimes in the world.

To quote the Legislative Summary issued with Bill C-10, “conditional sentencing … allows for sentences of imprisonment to be served in the community, rather than in a correctional facility.  It is a midway point between incarceration and sanctions such as probation or fines.”

Currently, a number of criteria must be met for a sentencing judge to impose a conditional sentence under the Criminal Code as follows: (i) the offence is not a “serious personal injury offence” (as defined in the Code), (ii) the offence is not a terrorism offence, (iii) the offence is not a criminal organization offence prosecuted by way of indictment for which the maximum term of imprisonment is 10 years or more, (iv) the offence is not punishable by a minimum term of imprisonment and (v) the sentencing judge has determined that the offence should be subject to a term of imprisonment of less than two years, is satisfied that serving the sentence in the community would not endanger the safety of the community and the conditional sentence would be consistent with the fundamental purpose and principles set out in the sentencing guidelines of the Code.

Bill C-10 amends section 742.1 of the Criminal Code to remove the current reference to serious personal injury offences and to provide that a conditional sentence of two years or less may be ordered unless, among other things, the offence is an indictable offence with a maximum term of imprisonment of 14 years or life.

According to the Legislative Summary accompanying Bill C-10, the Bill “amends the Criminal Code to restrict the availability of conditional sentences for certain offences … [restricting] the availability of conditional sentences for all offences for which the maximum term of imprisonment is 14 years or life and for [other] specified offences …”  and to “place greater emphasis upon the maximum term of imprisonment” for offences.

Both sections 45 (criminal conspiracy agreements, including price-fixing and market division/allocation agreements between competitors) and 47 (bid-rigging) of the Competition Act are indictable offences, subject to maximum terms of imprisonment of 14 years (recently increased as a result of amendments to the Competition Act made in 2009).

Given that the Competition Act was amended in 2009 and 2010 to significantly increase the penalties for criminal conspiracy offences (and lower the enforcement bar by removing the former competitive effects test – see: Competition Act amendments), this recent omnibus crime bill will further increase the potential risk for individuals participating in price-fixing, market allocation/division or output restriction agreements with competitors (the three categories of “hard core” or “per se” cartel offences prohibited under the new section 45) and bid-rigging activities.

For example, in the recent Quebec gasoline price-fixing cartel, thirteen individuals and six companies pleaded guilty, with fines totaling over Cdn. $2.8 million.  Of the thirteen individuals that plead guilty, six were sentenced to conditional sentences served in the community totaling 54 months (see: Two Individuals Plead Guilty in Quebec Gasoline Price-Fixing Cartel and List of Charges and Sentences in the Quebec Gasoline Price-fixing Cartel).  Following the coming into force of Bill C-10, such conditional sentences will no longer be possible.

Bringing more criminal cartel cases under the amended conspiracy provisions of the Competition Act (section 45) is also currently an enforcement priority for the Bureau (see: Commissioner of Competition Addresses Current Enforcement Priorities in Two Wide-ranging Talks in Vancouver and Remarks by Melanie L. Aitken, Commissioner of Competition to the Canadian Bar Association 2011 Fall Conference).

What will this mean to parties involved in criminal conspiracy or bid-rigging conduct?  Likely, like the U.S., jail time will mean actual jail time.

As such, this new law will further enhance the importance of adopting or revising effective corporate compliance programs and, where companies or individuals may have been involved in criminal conduct under the Competition Act, exploring the potential benefits in some cases of the Bureau’s formal Immunity and Leniency Programs.

Bill C-10 is currently making its way through the Senate and has not yet been proclaimed into force.

In making the announcement, the Commission said in its news release:

“The European Commission has opened formal antitrust proceedings to investigate whether international publishers Hachette Livre (Lagardère Publishing, France), Harper Collins (News Corp., USA), Simon & Schuster (CBS Corp., USA), Penguin (Pearson Group, United Kingdom) and Verlagsgruppe Georg von Holzbrinck (owner of inter alia Macmillan, Germany) have, possibly with the help of Apple, engaged in anti-competitive practices affecting the sale of e-books in the European Economic Area (EEA), in breach of EU antitrust rules. The opening of proceedings means that the Commission will treat the case as a matter of priority. It does not prejudge the outcome of the investigation.

The Commission will in particular investigate whether these publishing groups and Apple have engaged in illegal agreements or practices that would have the object or the effect of restricting competition in the EU or in the EEA. The Commission is also examining the character and terms of the agency agreements entered into by the above named five publishers and retailers for the sale of e-books. The Commission has concerns, that these practices may breach EU antitrust rules that prohibit cartels and restrictive business practices (Article 101 of the Treaty on the Functioning of the European Union – TFEU).”

Unlike Canada, where conspiracy (cartel) agreements between competitors are criminal, the European Commission commonly announces cartel investigations which are not criminal in Europe at an early stage of proceedings.

It is not yet clear what the basis of the Commission’s challenge and theory in this case is, given that the Commission’s investigation also involves Apple and that Article 101 of the EU Treaty prohibits not only agreements (e.g., price-fixing agreements) but also “concerted practices” between competitors which can, among other things, prohibit the exchange of pricing information between competing suppliers.

While the criminal conspiracy provisions of the Canadian Competition Act (under section 45) were amended in 2010, the Competition Bureau has yet to announce any price-fixing or other cartel cases under the new provisions (though in recent public remarks by the Commissioner of Competition, the Commissioner indicated that the Bureau was shortly preparing to do so – see: Commissioner of Competition Addresses Current Enforcement Priorities in Two Wide-ranging Talks in Vancouver).

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For the European Commission’s complete news release see:

Antitrust: Commission opens formal proceedings to investigate sales of e-books

For more about Canadian conspiracy/cartel law see:

Conspiracy (Cartels)

The Industry Minister’s comments closely follow a C.D. Howe Institute report also issued last week calling for fundamental changes to the ICA to stimulate foreign direct investment in Canada, including a change to the overarching test for foreign investment approval (replacing the current “net benefit to Canada” test with a national interest test) (see: New Publications – C.D. Howe Institute Report – Reforming the Investment Canada Act: Walk More Softly, Carry a Bigger Stick).

In the C.D. Howe Institute’s report, its authors Philippe Bergevin and Daniel Schwanen criticize the current test for approval under the ICA as “highly subjective and unpredictable”, arguing that by adopting a national interest test “Canada could reduce uncertainty and costs to businesses while improving transparency and accountability with respect to Canadians and foreigners alike, without compromising the federal government’s ability to implement national objectives and policies.”

Some of the highlights of the C.D. Howe Institute’s recent report include:

- The OECD ranks Canada as one of the most restrictive places in which foreigners can invest, especially among its OECD peers.

- Canada receives poor FDI rankings internationally based on the fact that it is one of the few countries with a formal investment review or screening process for all proposed foreign investments above a certain threshold (which is also lower than in most other advanced countries with similarly general and compulsory screening processes).

- Concepts that are not formally recognized under the ICA are “creeping into” Canada’s foreign investment review process: “[w]hile national security is a concept whose application sometimes can be used to shield industries from change for purely protectionist reasons, an even more elastic concept, and one that is creeping into Canadian debates on FDI even though it has no basis in the Investment Canada Act is that of ‘strategic’ economic sectors, firms, or other assets such as natural resources.  Simply by virtue of being dubbed ‘strategic’, these assets, the argument goes, should be protected from foreign ownership.”  One recent example being the debate around BHP’s proposed $40 billion hostile bid for Potash Corporation last year, for which approval was refused (which raised widespread debate about whether Potash was a “strategic asset”).

- The authors of the report argue that the current reliance on a net benefit test is unsatisfactory from the point of view of both openness to productive foreign investment and also the desirability of maintaining “a clear, predictable, transparent, and accountable foreign investment review regime”.

- On this basis, they argue that a “more encompassing, but clearer and more meaningful test” should be adopted – namely, a national interest test, which would consider if a proposed investment would threaten the Canadian government’s ability to (i) apply Canadian laws as to a similar Canadian investor or (ii) achieve significant policy objectives (including national security).

In an interesting, though critical, op-ed article in last Friday’s National Post (see: Foreign Investment Needs a Better Test), the authors of the C.D. Howe Institute report had this to say about the current test for review under the ICA:

“What difference does the net benefit test make? That’s not possible to quantify because we don’t know what future economic activity would have occurred had a blocked acquisition taken place. What’s more is that while sounding objective, the net benefit test is secretive and unpredictable, and often prevents the government from clearly articulating why it would oppose a proposed investment.

If the federal government examined large acquisitions of Canadian-owned firms by other Canadian-owned firms on the same basis, we would be correct in concluding that its actions represented an intrusive and ineffectual form of interventionist industrial policy. In the context of the Investment Canada Act, however, such intervention is acceptable because the investor is foreign – that is, the policy discriminates against foreign investors, and against Canadians who want to sell what they own to foreign investors.”

In his recent remarks following the C.D. Howe Institute’s report, Minister Paradis said that “we are always open to improving the regime” and that “if there are some things we can do to better address this and provide certainty, we will certainly be happy to look into it.”

Given, however, that some amendments to the ICA made in March 2009 are still not in force, including raising the monetary threshold for review of direct investments by WTO investors and altering the test to calculate a Canadian business’ assets (based on the “enterprise value”, or essentially market value, of the assets of the Canadian business rather than gross book value), it is unclear whether any significant changes to the ICA can be expected anytime soon.

Having said that, following the failed BHP bid for Potash last year, then Minister of Industry Tony Clement said that Canada’s existing foreign investment review regime needed to be reviewed to provide “greater clarity to Canadians and greater certainty to international investors.”

This led to a move for the federal Industry Committee to review the ICA, including based on concerns relating to the level of transparency of Ministerial review.  While the Industry Committee’s review of the ICA was interrupted by the last federal election, it remains to be seen whether the recent renewed criticisms of the ICA will result in another Government review of the existing ICA review regime.

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For more information about Canada’s Investment Canada and merger control rules see:

Investment Canada

Merger Control

For the C.D. Howe’s recent report, entitled Reforming the Investment Canada Act: Walk More Softly, Carry a Bigger Stick see:

Better Foreign Investment Rules Needed for Canada

Some of the highlights from the Commissioner’s remarks included the following:

General enforcement approach

- The Commissioner indicated that her general preference was for “consensual resolution”.

- However, the Bureau would not hesitate to seek remedies before the Tribunal or the courts where parties were either unwilling to discuss reasonable settlement options (or, alternatively, no viable remedy was available).

- The Commissioner views the Bureau’s role as “first and foremost” an enforcement agency and indicated that the federal Conservative Government’s position was that as a new Commissioner she should “get in there and enforce the law”.

- In this regard, the Commissioner suggested that, unlike some previous Commissioners (for example, her predecessor Sheridan Scott), advocacy was not her focus.

- The Commissioner also reiterated a common theme from other recent remarks – namely the Bureau’s interest in bringing new cases to clarify Canada’s competition laws.

- The Commissioner also generally discussed several of the key areas of the 2009 amendment to the Competition Act including second requests (“supplementary information requests”) in merger reviews, the amended conspiracy provisions and introduction of civil fines for abuse of dominance and civil misleading advertising (“administrative monetary penalties” or “AMPs” of up to Cdn. $10 million).

Mergers

- According to the Commissioner, the number of merger filings has increased this year over last and the complexity of transactions reviewed by the Bureau is up as well.  In this regard, the Bureau is seeing an increase in strategic transactions with overlap or vertical integration issues.

- Since the 2009 amendments to the Competition Act, the Competition Bureau has endeavoured to issue as many guidance documents as possible including a number of new enforcement guidelines (including the updated Merger Enforcement Guidelines, issued by the Bureau earlier this fall).

- The Bureau intends to publish more position papers on reviewed mergers (moving away from its previous practice of issuing longer more detailed Technical Backgrounders).

- The Bureau intends to establish a “merger register” with “skeletal outlines” of reviewed mergers.

- The Commissioner also indicated that as a result of recent enforcement efforts generally, it has been able to obtain “more robust remedies” in mergers.

Civil enforcement

- The Commissioner spoke in some detail about the recent CREA and TREB real estate cases and the Bureau’s ongoing Visa and Mastercard merchant fees price maintenance case.

- With respect to real estate, the Commissioner said the Bureau was “very pleased” with the CREA settlement and that its concerns had been “fully addressed” in the consent agreement negotiated with CREA late last year.  The Commissioner also said that the Bureau had been seeing “innovation in the real estate market” following the consent agreement.

- The Commissioner also described some of the new business models the Bureau was seeing in light of the CREA consent agreement, including “a la carte” (i.e., unbundled) residential real estate services.

Criminal enforcement

- In general, the Commissioner indicated that following the 2009 amendments to the Competition Act, it has proven “much tougher to effect change” with respect to the criminal provisions of the Competition Act (e.g., section 45, criminal conspiracy offences).

- In this regard, the Commissioner said that while it takes time for criminal cases to come through and mature (largely as a result of the procedural safeguards necessary in criminal matters) the Bureau was preparing to announce several new cartel cases under the amended section 45.

- The Commissioner also said that the Bureau had a “real commitment to change the game” with respect to criminal matters under the Competition Act and would “be more appropriately aggressive” in bringing new criminal cases and testing the new criminal conspiracy provisions of the Act.

- The Commissioner said that the “amendments came not a moment too soon” as Canada was at risk of falling off of the “serious cartel enforcement jurisdiction radar”, based on the difficult legal test under the former section 45 and high market effects burden.

- Finally, on the criminal side, the Commissioner indicated that the Bureau was increasingly cooperating with Asian enforcement authorities in criminal cases, citing the Korean competition/antitrust authority as one example.

Misleading advertising and deceptive marketing

- With respect to misleading advertising and deceptive marketing, the Commissioner confirmed that this remains an enforcement priority for the Bureau – as the Commissioner put it, “an area of concern.”

- In general, the Commissioner indicated that the Bureau did not have the resources to pursue all misleading and deceptive marketing matters and, with respect to fraudulent marketing, that enforcement was akin to the “whack a mole” game in that once a deceptive marketer was hit in one jurisdiction, they frequently arose in another.

- In this regard, the Commissioner did highlight some of the Bureau’s initiatives with key enforcement agencies – the U.K., Australia and the United States – that have, according to the Commissioner, been effective in more effectively fighting cross-border deceptive marketing.

Abuse of dominance

- With respect to abuse of dominance (under section 79 of the Competition Act), the Commissioner indicated that based on further changes the Bureau has made to the existing Abuse of Dominance Enforcement Guidelines, it may issue another revised draft of the Abuse Guidelines for public consultations.

- In this regard, the Commissioner suggested that a revised draft of the updated Abuse Guidelines was “imminent” and may be issued before the end of the year.

Advisory opinions

- With respect to the Bureau’s practice of issuing binding advisory opinions under section 124.1 of the Competition Act, the Commissioner discussed the fact that the Bureau’s new narrower policy, under which it now only states the provision under which its view conduct falls (and in respect of criminal matters, whether it has any present intention to commence proceedings), is intended to more accurately reflect its powers to issue opinions under section 124.1.

- The Commissioner also said that the Bureau’s current practice was not to include any view in advisory opinions as to whether particular defenses, such as the new ancillary restraints defense, were likely to apply to proposed conduct the subject of an advisory opinion application.

TMX/Maple transactions

- The Commissioner declined to comment in any detail about the TMX/Maple transaction, except to reiterate already publicly disclosed statements that the Bureau had “serious concerns” relating to both trading and clearing services.

- With respect to questions about behavioural remedies in general, which are being debated in respect of the TMX/Maple transaction, the Commissioner affirmed the Bureau’s general reluctance for behavioural remedies (as opposed to structural remedies / divestiture), though acknowledged that such remedies are generally more acceptable when a regulator such as the CRTC is involved (a potential parallel in the TMX/Maple transaction being the OSC).

Self-regulated professions

- The Commissioner received several questions regarding the Bureau’s work in the self-regulated professions area (for example, the Bureau’s 2007 Self-regulated Professions study, which compared competition in six Canadian self-regulated professions).

- The Commissioner indicated that the Bureau’s advocacy work in this area was finished for the moment, that this was largely an initiative of her predecessor (the former Commissioner, Sheridan Scott) and indicated that the Bureau had no present intentions to commence new work in this area.

1.  Single damages for parties in private actions;

2.  Private actions for abuse of dominance with leave (to which Justice Simpson adds that the Tribunal has exercised its power to grant leave to private parties responsibly);

3.  A reference power for parties in negotiations with the Commissioner; and

4.  The approval of consent agreements by a judge alone – with written comments from but no intervention by affected parties (which, in Justice Simpson’s view, will “ensure that the Commissioner has a defensible theory of harm to support his or her settlements”).

Of these, several caught my eye, including the proposal to introduce damages as a Tribunal remedy and private actions for abuse of dominance.

While damages actions are possible and increasingly common for violations of the criminal provisions of the Competition Act, only remedial orders (e.g., orders to stop conduct, resume supply on usual trade terms, etc.) are available from the Tribunal.  Together with the leave requirement (leave is required from the Tribunal for private parties to commence private access proceedings before the Tribunal), the unavailability of damages is a common obstacle preventing parties from making applications to the Tribunal.  In this regard, for competition law matters where Tribunal applications are a possibility (refusal to deal, price maintenance and exclusive dealing / tied selling / market restriction), as a practical matter advice typically begins with a discussion of available remedies and the fact that damages are not available from the Tribunal (which in many cases may remove the Tribunal as a commercially viable option for parties).

With respect to the potential for private actions for abuse of dominance, this would be a significant step indeed for the Tribunal.  Presently, the Commissioner of Competition has exclusive jurisdiction to commence abuse of dominance proceedings before the Tribunal.  This, together with the typical cost and complexity of abuse applications, may have contributed to the fact that there have been less than 15 abuse of dominance cases since the modern Competition Act was introduced in 1986.  While monetary penalties were introduced for the first time for abuse of dominance in 2009 (“administrative monetary penalties” or “AMPs” of up to Cdn. $10 million), abuse of dominance remains one of the last reviewable practices under the Competition Act for which private parties have no right to make applications to the Tribunal (together with mergers, under which the Commissioner also has exclusive jurisdiction to challenge under the Act).  While this is an interesting proposal, it is not clear that opening the door to private parties would in practice lead to more abuse applications heard by the Tribunal based, among other things, on the significant cost and complexity of taking such proceedings forward.  Having said that, the availability of damages and a private access right for abuse of dominance may give aggrieved parties an additional option for negotiating resolutions to conduct engaged in by dominant firms (i.e., if the prospect of private access and monetary penalties existed).

Justice Simpson’s proposal for a unilaterally available reference power is also an interesting, and perhaps needed change.  While some limited reference powers for reviewable matters were added to the Competition Act as a result of 2002 amendments, they are only available to the Commissioner unilaterally, to private parties granted leave for private access proceedings under the refusal to deal and exclusive dealing/tied selling/market restriction provisions or to a private party subject to inquiry and the Commissioner on consent (i.e., the Commissioner’s agreement is required).  As such, the existing reference provisions for reviewable matters are of limited practical use for private parties where the Commissioner has (or is likely) to take a particular position on a reviewable matter.

In light of the fact that the most significant changes to Canada’s Competition Act in twenty-five years were recently made in 2009 and 2010, it remains to be seen whether the Government will have the appetite to make further amendments expanding the statutory jurisdiction of the Tribunal.  If so, this may open the door further to private competition actions in Canada.

For Madam Justice Simpson’s complete comments see: Canadian Competition Law Review (p. 49).