In making the announcement, the Bureau said:

“Two of the accused, Gary Neiderer and Fabien Chouinard are territorial managers employed by Sonic. They were sentenced today to fines of $3,000 and $4,000 respectively. The other five accused are service stations owners. Jacques Blais and Louis Blais operated under the Shell banner. Luc Fecteau, Yvan Grondin and Jacques Robert operated under the Esso banner. The five owners were each sentenced to fines of $5,000.

Charges were laid in June 2008 and July 2010 against 38 individuals and 14 companies for fixing the price of gas at pumps in Victoriaville, Thetford Mines, Magog and Sherbrooke, Quebec. As of today, 21 individuals and six companies have pleaded guilty in this case, with fines totalling over $2.8 million. Of the 21 individuals who have pleaded guilty, six have been sentenced to terms of imprisonment totalling 54 months.”

The Bureau has also significantly expanded its summary of investigations into gasoline pricing in Canada, presumably based on the number of complaints and inquiries the Bureau receives relating to gas prices – see: Investigating Cartels – Gas Prices.

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For more information about price-fixing laws in Canada see:

Conspiracy (Cartels)

The Antitrust Law Section of the American Bar Association and the International Bar Association (IBA) will be holding their bi-annual International Cartel Workshop in Vancouver from February 1-3, 2012 at the Fairmont Hotel Vancouver.

From the American Bar Association:

“The International Cartel Workshop, recognized globally as the premier international cartel program offered anywhere, is presented only once every two years. The next Workshop, which will have many new features, will be held in Vancouver, Canada during February 1-3, 2012.  The 2012 program will continue the Workshop’s tradition of instruction by demonstration, with experienced faculty from around the globe taking you inside a hypothetical international cartel matter — from detection by government enforcers to the disposition of government prosecutions and private damage claims.  The Workshop will also highlight new developments in the law and leniency practices around the world, with leading enforcers and experienced private practitioners demonstrating how critical decisions are made on both sides of the table and providing examples of important interactions between counsel and enforcers.  The 2012 Workshop’s international faculty includes many of the most accomplished cartel attorneys in the world, as well as the most senior cartel enforcement officials from a variety of jurisdictions.”

For more information about the joint ABA/IBA Cartel Workshop see:

American Bar Association – Antitrust International Cartel Workshop

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

The FTC is also alleging that parties used a trade association (the Ductile Iron Fittings Research Association) to exchange information and monitor adherence to the cartel agreement.

See: FTC Action Protects Competition in Market for Iron Pipe Fittings Used in Municipal Water Systems

In making the announcement, the FTC said:

“The complaints allege a broad range of collusive and exclusionary conduct calculated to raise the price of ductile iron pipe fittings, an essential component of the nation’s water infrastructure. … The FTC will act aggressively to protect cash-strapped municipalities and the consumers they serve from anticompetitive conduct.

Ductile iron pipe fittings, known as DIPF, are used by municipal water systems to change the diameter and direction of pipelines carrying drinking and wastewater, and are sold by suppliers such as McWane, Star, and Sigma through specialty wholesale distributors. McWane and its largest competitors in the DIPF market, Sigma and Star, all sell imported DIPF. In addition, McWane was the only domestic producer of a full line of small and medium-sized DIPF until Star entered the market for U.S.-made DIPF in 2009.

…

The FTC alleges that beginning in 2008, McWane, Sigma, and Star participated in an illegal conspiracy to fix the price at which imported DIPF are sold in the United States.

According to the FTC, McWane invited Sigma and Star to collude with it beginning in early 2008, when it communicated to Sigma and Star a plan to raise and fix prices for imported DIPF. The FTC alleges that Sigma and Star accepted McWane’s invitation to collude and, to further the conspiracy, each raised its prices for imported DIPF in January 2008 and again in June 2008. Between June 2008 and January 2009, according to the FTC, the three firms exchanged information documenting the volume of their monthly sales through a trade association called the Ductile Iron Fittings Research Association (DIFRA), and each company used this information to monitor whether the other co-conspirators were adhering to the terms of their collusive arrangement.”

In Canada, section 45 of the Competition Act makes it a criminal offence for actual or potential competitors to fix prices, divide markets (e.g., geographic markets or customers) or restrict output.  The potential penalties for non-compliance with section 45 include fines of up to $25 million (per count), imprisonment for up to 14 years, or both.

In addition, “information exchanges” (i.e., the exchange of competitively sensitive information) is one of the primary risk areas for trade and professional associations, which may include the exchange of information relating to current/future pricing, market shares, costs, customers, current/future business plans and strategic plans and markets.

This is because, when shared with competitors, competitively sensitive information can lead to either the formation of an anti-competitive agreement (e.g., a price-fixing agreement) or support the inference of an anti-competitive agreement (e.g., the exchange of pricing information followed by a stabilization of price can indicate that an agreement contravening the Competition Act exists).

Based on the potential risk, associations should adopt basic compliance guidelines for information exchanges between members (e.g., in relation to benchmarking, research, lobbying or other joint activities among members).

Some other practical steps associations can take to reduce potential competition law risk include:

Adopt and maintain an effective compliance program.  According to the Competition Bureau, an effective compliance program “plays a crucial role for trade associations.”  Some of the benefits of a compliance program include reducing the risk of violating the Competition Act, reducing the costs of investigations and proceedings and potentially mitigating penalties.

Options for associations range from formal compliance programs encompassing all association activities to compliance guidelines for key activities (e.g., meetings, information exchanges and specific initiatives such as benchmarking, research and development initiatives and joint negotiations).

Adopt agendas and minutes for all association meetings.  Associations should prepare written agendas and keep minutes for all meetings.  Discussions at meetings should also stay within the boundaries of legitimate agenda items and discussions (or exchanges) of competitively sensitive information should be avoided.  These include discussions of pricing, costs, individual customers, markets, business or strategic plans and related “competitively sensitive” topics.

While the exchange of competitively sensitive information itself cannot violate the criminal conspiracy provisions of the Competition Act (section 45, although may now fall within the scope of the new civil agreement provision of the Act, section 90.1), discussions or exchanges of competitively sensitive information between competitors is considered to be a potentially high risk area given that they can be used as evidence by the Bureau, a court or private plaintiff to infer the existence of an agreement that may violate section 45.

Adopt and follow conduct of meeting guidelines.  One of the most practical steps a trade or professional association can take to reduce potential competition law risk is to adopt and strictly follow conduct of meeting guidelines.  Such guidelines commonly include restrictions on the exchange of competitively sensitive information (of the types discussed above) and on discussions of topics that may lead to conspiracy risk under section 45 of the Competition Act (e.g., discussions relating to pricing, markets, concerted refusals to deal or limiting production or supply of goods or services – in large part, discussions around the three categories of offences under section 45: price-fixing, market division/allocation and output restriction agreements).

Such guidelines also commonly include guidance on steps to take if inappropriate discussions or activities arise during association board, committee, task force or other meetings or events.

Perform periodic compliance audits.  Having a compliance program or policy in place that is not followed can, in some circumstances, be more harmful than not having a program or policy at all (particularly if association staff understand the competition law guidelines and elect not to follow them).  As such, a practical way for associations to monitor compliance with compliance programs and policies is to conduct periodic audits.  These can be performed on an association wide, activity-specific or spot basis.

Competition law compliance orientations for new association executives and staff.  Another practical step that associations can take to ensure competition law compliance is to conduct compliance orientations for new board and executive members.  In this regard, the Competition Bureau’s view in its Corporate Compliance Programs Bulletin is that “senior management’s clear and unequivocal support is the foundation of a credible and effective corporate compliance program.”  The Bureau in general views senior management support as one of five key elements of an effective compliance program.

Obtain legal advice for key association initiatives.  Many associations do not have the budget for extensive legal advice or compliance for every aspect of association activities.  Recognizing that, it is prudent for associations to obtain advice for key activities and initiatives – these may include specific projects, such as benchmarking, research or joint member initiatives (e.g., joint marketing, purchasing or negotiations with significant purchasers).

Avoid informal or “off the record” meetings.  Association leadership should discourage informal or “off the record” meetings between members, particularly on the “fringes” of association meetings or using association facilities.

This is not to say that members of an association cannot meet informally for social purposes, but in a number of past association cases members either met informally, or in several cases actually established “sham” associations, to form and maintain criminal cartel arrangements.

Association members should also be aware that merely because a meeting is held “off the record” or in camera (i.e., not reflected in association meeting minutes) does not mean that discussions during such meetings, or the fact of the meeting itself, cannot be used as evidence of alleged anti-competitive conduct.

Generally review all association activities through a “competition lens”.  Finally, it is useful for association executives and personnel to review association initiatives and activities generally through a “competition lens”.

For example, if particular association activities may result in higher prices, less quality or choice, make it more difficult for particular members or competitors to compete, or will generally reduce competition, such activities may be more likely to raise competition law concerns (or at minimum mean that legal advice should be sought).

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For more information about Canada’s conspiracy rules and associations and competition law see:

Conspiracy (Cartels)

Associations

Associations News

At the same time, new legislation has been introduced that will impact how companies market in Canada, most notably the new federal anti-spam legislation (Bill C-28), and new cross-border enforcement initiatives were announced including a new international do-not-call enforcement network co-chaired by the CRTC.

These developments mean that it remains important for companies to effectively and efficiently navigate through Canadian advertising and marketing rules.  Some of the more interesting and noteworthy developments in 2010 and 2011 are discussed below.

CANADIAN ADVERTISING LAW: A YEAR IN REVIEW

Bell Canada pays $10 million AMP.

On June 28, 2011, the Competition Bureau (the “Bureau”) announced that Bell Canada agreed to stop making allegedly misleading claims regarding the prices of some of its services and pay an administrative monetary penalty (“AMP” – essentially a civil fine) of $10 million, the maximum penalty for misleading advertising under the Competition Act (the “Act”).  The Bureau challenged the accuracy of price claims made by Bell, as well as alleged hidden fees and fine-print disclaimers.  The Bureau’s concerns were based, among other things, on services that were literally not available at the advertised prices, including for Bell’s home phone, Internet, satellite TV and wireless services. Advertising claims can violate the misleading advertising provisions of the Act where they are either literally false or misleading (e.g., material information, such as price or important conditions, are not adequately disclosed).

New federal anti-spam legislation (Bill C-28).

In late 2010, the federal government introduced new federal anti-spam legislation (Bill C-28, the Fighting Internet and Wireless Spam Act – “FISA”).  Unlike similar U.S. legislation, FISA creates an “opt-in” regime for commercial electronic marketing, imposing both consent and form requirements, and also amends the Act to prohibit false or misleading commercial representations made electronically (e.g., in website headers, web links or website content).  In particular, the criminal and civil misleading advertising provisions of the Act, and related penalty provisions, have been broadened to expressly include misleading representations in the electronic and online environment.  Once FISA is in force, maximum penalties will be $1 million (for individuals) and $10 million (for corporations).

Bureau challenges Rogers’ performance claims.

The Bureau is currently challenging Rogers for allegedly making false performance claims in relation to its Chatr cell phone brand (in particular, claims that Rogers’ brand had fewer dropped calls than competing new entrants).  The Bureau is seeking a court order for Rogers to cease the conduct, a $10 million AMP, restitution for consumers and publication of a corrective notice.

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.

New international do-not-call network. 

In October, 2011, the federal CRTC announced that, together with the Australian Communications and Media Authority, it has assembled 12 enforcement agencies to form an international do-not-call network (Australia, Canada, France, Hong Kong, Ireland, Israel, Korea, Mexico, New Zealand, Spain, the UK and the United States).  Telemarketing in Canada is already subject to competition law rules, the national Do Not Call List and provincial licensing requirements.

Recent speech by the Commissioner highlights enhanced Bureau enforcement.

On October 25, 2011, the Bureau published the Commissioner of Competition’s (the “Commissioner”) speech given at the 2011 CBA Annual Competition Law Conference.  It is fair to say the Commissioner’s speech presented a singular tone across the civil and criminal competition law areas: continued enforcement.  Some highlights of her speech regarding advertising include comments that misleading advertising “continues to be an area of concern”, that companies should not “mislead the public by hiding charges or conditions in fine print” or by “making claims you can’t back up” (i.e., false performance claims).  The Commissioner also said the Bureau continues to look for “tangible results for Canadians” including restitution for false advertising claims and settlements to stop false marketing claims.

Misleading advertising a continued enforcement priority. 

Enforcement continued to be a theme for the Commissioner in two talks in Vancouver in the fall of 2011, where she confirmed that misleading advertising and deceptive marketing remain enforcement priorities – or, 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 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.  The Commissioner also highlighted some of the Bureau’s initiatives with other major enforcement agencies – for example, the U.K., Australia and the United States – that have proven effective in fighting cross-border deceptive marketing.

Canadian telemarketer receives a two-year prison sentence.

On October 3, 2011, the Bureau announced that a deceptive telemarketer was sentenced to two years in prison for a deceptive telemarketing scheme relating to the sale of business directories.  This is the most recently announced telemarketing case by the Bureau, which shows that the criminal deceptive telemarketing and misleading advertising provisions of the Act remain enforcement priorities.  The case also illustrates that, while uncommon for competition law offences, the Bureau is increasingly seeking penalties against individuals.  The Bureau has brought and sought penalties in a number of deceptive telemarketing cases in the past several years, many of which have involved cross-border marketing of business directories to U.S. and other international companies.  The Act prohibits false or misleading telemarketing representations and also prohibits telemarketers from engaging in other activities including: (i) requiring advance payments to receive a prize, (ii) offering gifts as inducements to purchase other products without fairly disclosing the value of the gifts, (iii) failing to provide adequate and fair disclosure of the number and value of prizes and (iv) requiring advance payments for products offered at inflated prices.  Telemarketers are also required to disclose certain information at the beginning of a call and other information at some point during a call.

Bureau negotiates settlement with Canadian Nivea distributor over performance claims.

On September 7, 2011, the Bureau announced a settlement with Nivea’s Canadian distributor, Beiersdorf Canada Inc., relating to allegedly false or misleading performance claims.  The Bureau took issue in this case with claims suggesting that the use of skin cream could lead to weight loss.  Under the consent agreement negotiated with the Bureau, Beiersdorf agreed to pay a $300,000 AMP, refund Canadian customers and remove its products from Canadian shelves.  Under the Act, false or misleading product performance claims can violate both the “general” criminal or civil misleading advertising provisions (sections 52 and 74.01) and a specific performance claim provision, which prohibits representations to the public regarding the performance of products that are not based on “adequate and proper testing”.  This section can be particularly relevant to advertising and marketing where the speed, efficiency or other product performance is a key marketing component.  While performance claims themselves are not prohibited, any product testing or verification must be conducted before a claim is made and the onus, if challenged, is on the person making the claim to verify the performance.   The Competition Tribunal (the “Tribunal”) has also established a non-exhaustive list of factors relevant to determining whether product testing is “adequate and proper”.

Albertans sentenced to jail time for cross-border deceptive telemarketing.

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

International sweep of social media sites.

In late 2010, the Bureau participated in an international sweep of social media sites to detect fraudulent and deceptive advertising on social networking sites.

AMPs imposed in job search service case.

In late 2010, the Tribunal imposed AMPs of $20,000 and $10,000 against parties in Canada (Commissioner of Competition) v. Premier Career Management Group Corp. for making misleading claims in relation to a job search service (following a Federal Court of Appeal decision reversing an earlier Tribunal decision finding the claims were not made “to the public”).

Bureau settles with two Canadian spa retailers.

In 2010, the Bureau announced it had reached settlements with two spa retailers in relation to allegedly false energy savings 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.  This case is the most recent example of the Bureau’s action in the spa retailing sector.  The Bureau and the Canadian Standards Association have also jointly published enforcement guidelines addressed specifically to environmental marketing – Environmental Claims: A Guide for Industry and Advertisers – intended to provide companies with more guidance for environmental marketing and “consumers with greater assurance about the accuracy of environmental claims.”

These include:

1.  Adopt and maintain an effective compliance program.  According to the Bureau, an effective compliance program “plays a crucial role for trade associations.”  Some of the benefits of a compliance program include reducing the risk of violating the Act, reducing the costs of investigations and proceedings and potentially mitigating penalties.  Options for associations range from formal compliance programs encompassing all association activities to compliance guidelines for key activities (e.g., meetings, information exchanges and specific initiatives such as benchmarking, research and development initiatives and joint negotiations).

2.  Adopt agendas and minutes for all association meetings.  Associations should prepare written agendas and keep minutes for all meetings.  Discussions at meetings should also stay within the boundaries of legitimate agenda items and discussions (or exchanges) of “competitively sensitive information” should be avoided – this includes discussions of current/future pricing, costs, individual customers, markets, market shares and business or strategic plans.

3.  Adopt and follow conduct of meeting guidelines.  One of the most practical steps an association can take to reduce competition law risk is to adopt and strictly follow conduct of meeting guidelines.  Such guidelines commonly include restrictions on the exchange of competitively sensitive information (of the types discussed above) and on discussions of topics that may lead to conspiracy risk under section 45 of the Act (e.g., discussions relating to pricing, markets, concerted refusals to deal or limiting the production or supply of goods or services).  Conduct of meeting guidelines also commonly include guidance on steps to take if inappropriate discussions or activities arise during association meetings or events.

4.  Perform periodic compliance audits.  Having a compliance program or policy in place that is not followed can, in some circumstances, be more harmful than not having a program at all (particularly if association personnel understand the terms of the program and choose not to follow it).  As such, one practical way for associations to monitor compliance is to conduct periodic audits of association activities, which can be performed on an association-wide, activity-specific or spot basis.

5.  Conduct competition compliance orientations for new association executives and staff.  Another practical step that associations can take to ensure competition law compliance is to conduct compliance orientations for new board and executive members.  In this regard, the Bureau’s view in its Corporate Compliance Programs Bulletin is that “senior management’s clear and unequivocal support is the foundation of a credible and effective corporate compliance program.”

6.  Obtain legal advice for key association initiatives.  Many associations do not have the budget for extensive legal advice.  Recognizing this, it is nevertheless prudent for associations to obtain advice for key activities and initiatives.  These may include specific projects, such as benchmarking, research or joint member initiatives (e.g., joint marketing, purchasing or negotiations with significant purchasers).

7.  Avoid informal or “off the record” meetings.  Associations should discourage informal or “off the record” meetings between members, particularly on the “fringes” of association meetings or using association facilities.  This is not to say that members cannot meet informally for social purposes, but in a number of past association cases members either met informally (and  in several cases actually established “sham” associations) to form and maintain criminal cartel arrangements.  Association members should also be aware that merely because a meeting is held “off the record” or “in camera” (i.e., a discussion during a meeting is not recorded in meeting minutes) does not mean that discussions, or the fact of the meeting itself, cannot be used as evidence in competition law proceedings.  The Bureau and private plaintiffs can, and commonly do, use such “circumstantial evidence” as part of their cases.

8.  Generally review all association activities through a “competition lens”.  Finally, it is useful for association executives and personnel to review association initiatives and activities generally through a “competition lens”.  For example, if particular association activities may lead to higher prices, less quality or choice, make it more difficult for some members or competitors to compete or generally reduce competition, this may raise competition law concerns (or at minimum mean that advice should be sought).

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For more information about competition law and associations see:

Associations

Associations News

From the Canadian Institute:

“We have obtained the highest quality speakers to present you with cutting edge analysis and practical guidance on the latest issues in this constantly evolving area of law. In fact, leaders in this field have been relying on our conference year after year to hone their skills, so join us at The Canadian Institute’s 18th Annual Advertising & Marketing Law program and be equipped with the tools necessary to be completely confident in your practice.  Keynote Address: Melanie Aitken, Commissioner of Competition, Competition Bureau Canada Recent Enforcement Initiatives and Future Directions of the Competition Bureau.

In the past year we have already seen, and will continue to see significant developments. You will learn about them all through our stimulating and interactive mix of sessions, including:

The latest need to know enforcement trends and priorities of the Competition Bureau

An in-depth analysis of the Anti-Spam legislation – in anticipation of it being proclaimed into force

The noteworthy differences between our Anti-Spam legislation and the U.S. Can-Spam Act

A practical session on drafting disclaimers on all forms of media

The most up-to-date tips on running contests

Risk mitigation for all emerging and recently revived marketing & advertising techniques

The latest issues and trends from the U.S. and how they may affect you”

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For more information see:

The Canadian Institute – Advertising and Marketing Law Conference

It is fair to say that the Commissioner’s recent speech presented a singular tone across the civil and criminal competition law areas: enhanced enforcement.

Of the Commissioner’s remarks, some of the more interesting points include the Bureau’s increased focus on reviewing non-notifiable mergers (i.e., transactions that do not trigger the notification thresholds under the Competition Act), the statement that the Bureau has begun to revoke markers in some immunity cases where in its view immunity applicants are not complying with its Immunity Program and a subtle suggestion that the Bureau was preparing to bring, but not quite yet in a position to commence, the first conspiracy cases under the amended section 45 (Canada’s new hard core criminal conspiracy offences).  The following are some highlights from the Commissioner’s recent speech.

OVERVIEW

Enforcement priorities:

“When I began my term as Commissioner, I outlined three priorities, about which I have spoken to this audience on a number of occasions. …

Accordingly, our priorities reflect, and are informed by, our ongoing and principal commitment to enforcement. They are:

first, continuing to achieve results for Canadians through active, targeted and principled enforcement;

second, applying our competition laws in a progressive and transparent way that keeps pace with a changing marketplace; and

third, cultivating our strong and agile enforcement capacity to deliver results that matter.

I believe that through both our words and our actions to date, our message is being heard: we, at the Bureau, will not hesitate to act to promote competition in the Canadian marketplace. We will hold to account companies that take advantage of Canadians.

In the last 2 years, we have brought forward a number of important cases and demonstrated that, where there is a clear violation of the law, we will not hesitate to use the tools available to us to investigate and prosecute the offenders. To my mind, a consistent, principled enforcement strategy is the best deterrent of all — bar none.”

MERGERS

Merger control initiatives:

New merger Interpretation Guidelines:

“Consistent with this goal, our Mergers Branch has issued a number of new guidance materials this year, including most recently an interpretation guideline on waiting periods for hostile transactions, and guidance on “no action” letters in merger reviews.”

Merger Enforcement Guidelines (MEGs):

“We have also consulted widely on revisions to the Merger Enforcement Guidelines (the MEGs) to reflect our current practice, and I am pleased to announce the publication of the revised MEGs this week.”

Merger Remedies Bulletin:

“We are also working to revise the Remedies Bulletin and consent agreement template, informed by the conclusions of our Merger Remedies Study and our experience over the past couple of years in developing consent agreements that have implemented the robust remedies we have been securing, and done so, increasingly effectively.”

Merger Review Process Guidelines:

“In addition, we are making changes to the Merger Review Process Guidelines based on our experience with the two–stage merger review process over the past two and a half years.”

Second phase merger reviews (Supplementary Information Requests, “SIRS”):

“In practice, our Mergers Branch has been quite busy, both in terms of the number of filings, and the size and complexity of transactions. Since the amendments came into force, we have issued thirteen supplementary information requests and finalised ten consent agreements. There have been 104 filings so far this fiscal year, which is on par with the number of filings received at this time last year.”

Monitoring non-notifiable transactions:

“As for our enforcement approach, we are determined to take action as required with respect to mergers that will have a significant anti–competitive effect, regardless of their size.

To that end, we are proactively monitoring closed and non–notifiable transactions, and recently challenged our first transaction since 2005, a completed merger in the hazardous waste industry in British Columbia.”

CIVIL (REVIEWABLE) MATTERS

Organized real estate (CREA and TREB cases):

“We have brought forward a number of important cases in our Civil Matters Branch this past year, including those against the Canadian Real Estate Association, the Toronto Real Estate Board, and Visa and MasterCard.

As you are maybe aware, the Bureau reached an agreement with the Canadian Real Estate Association late last year that fully addressed our concerns, and we are seeing positive change in the market for real estate services.

This remedy has really made a difference for Canadians, and in a very important transaction in their lives. I am very proud of what we achieved in this case.

…

Last May, we filed an application against the Toronto Real Estate Board (TREB), seeking to prohibit restrictions placed on realtors that dictate how they distribute MLS information to their clients.

Under these rules, real estate agents can share important MLS data with their clients, but only if they do so by hand, fax, or e–mail — they are prevented from sharing the very same information over the internet through password–protected websites, also known as Virtual Office Websites.

These restrictions are denying consumer choice and the ability of real estate agents to introduce innovative real estate brokerage services through the internet.

Ultimately, and unfortunately, we felt it necessary to seek a legally binding order from the Tribunal to ensure greater competition and increased innovation in the market for real estate services in Toronto.”

CRIMINAL MATTERS

More aggressive criminal enforcement:

“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.”

Continued use of investigative powers:

“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.”

Criminal enforcement priorities: cartels and bid-rigging:

“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.”

Enforcement of new conspiracy (cartel) rules:

“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.”

Penalties against individuals:

“In both cartel and bid–rigging cases, we will be appropriately aggressive when dealing with individuals. To date, 38 individuals have been charged in the Quebec Octane case, and last December, five individuals were accused of rigging bids for private sector contracts in residential highrise buildings in the Montreal area.”

Seeking to drive the leniency/immunity processes:

“Our commitment to a consistent approach will also extend to our dealings with cooperating parties. Our goal is to move our investigations along in a timely way and, to that end, we will insist that all leniency applicants engage in settlement negotiations very shortly after applying for leniency.

Whatever may have been your experience in the past, this is under the Bureau’s control, and we do intend to require compliance with our clearly stated policy. No one has a right to retain the leniency privilege without delivering on their end of the bargain.”

Revoking markers:

“The Immunity and Leniency Bulletins specify that information must be proffered within 30 days to qualify for immunity or a fine reduction. We have begun to revoke markers where there has not been a sufficient proffer of information within that specified time. To be very clear, we expect, and will require, cooperating parties to fulfill their obligations in a timely way.”

ADVERTISING AND MARKETING

Use of new misleading advertising penalties:

“Moving then to talk about our Fair Business work. Misleading representations continue to be an area of concern for the Bureau, as consumers need accurate information in order to make informed choices. It’s very simple — don’t mislead the public by hiding charges or conditions in fine print, or by making claims you can’t back up.

In such cases, where appropriate, we are also seeking restitution for consumers, as we are in the Rogers Chatr and Nivea cases. We want tangible results for Canadians.

Most recently, in June, we signed a consent agreement with Bell Canada under which Bell agreed to stop making misleading representations about the prices offered for its services.

We had determined that, since December 2007, Bell had charged higher prices than advertised for many of its services, including home phone, Internet, satellite TV and wireless.

Under the terms of that consent agreement, which Bell entered into to its credit with no need for the Bureau to commence litigation, Bell also agreed to pay an administrative monetary penalty of $10 million dollars, the maximum amount allowed under the Act, and Bell agreed to modify all of its non–compliant advertising within 60 days.”

Enforcement of settlement terms (consent agreements):

“I should also note that we are also taking firm steps to communicate the seriousness with which we expect parties to view consent resolutions. We will not allow messages to the public to be diluted or compromised.

For example, in September, we reached a consent agreement with Beiersdorf, the maker of Nivea products, over what the Bureau concluded were false or misleading performance claims.

Following the settlement, the company asserted in the media and on its own website — directly contrary to our conclusions — that its performance claims were based on independent research and complied with Canadian requirements and guidelines.

These assertions were not in accordance with the consent agreement, as Beiersdorf had agreed that it did not contest the Bureau’s conclusions. After being advised by the Bureau that it was required to adhere to the letter and spirit of the commitments it made, Beiersdorf complied, and removed the offending statement from its website.

As in this case, we will continue to be vigilant in monitoring consent agreements, and should a violation of one occur, we will not hesitate to take further enforcement action as warranted. Indeed, we have a contempt proceeding in the works right now, with respect to another consent agreement and have even searched the non–compliant party in that proceeding.”

Cross-border enforcement (misleading advertising and deceptive marketing):

“Unfortunately, misrepresentations, and in particular, fraudulent misrepresentations, continue to ensnare consumers, and new technology is only making it easier for perpetrators to export scams to other countries. To that end, international cooperation is very important in enforcement, and there are huge benefits to piling on enforcement action in multiple jurisdictions at the same time. We are working closely with our committed colleagues at the ACCC, in the U.K. and at the FTC.”

____________________

For the Commissioner’s complete speech see:

Remarks by Melanie L. Aitken, Commissioner of Competition – Keynote Speech at the Canadian Bar Association 2011 Fall Conference

An Act to promote the efficiency and adaptability of the Canadian economy by regulating certain activities that discourage reliance on electronic means of carrying out commercial activities, and to amend the Canadian Radio-television and Telecommunications Commission Act, the Competition Act, the Personal Information Protection and Electronic Documents Act and the Telecommunications Act (the “Anti-spam Act”).

Earlier this Fall, consultations on two sets of draft Regulations concluded and so the new law may come into effect later this Fall or in the Spring of 2012 (see coming into force information below).

In passing the Anti-spam Act Industry Canada said:

“On December 15, 2010, the Government of Canada passed the Fighting Internet and Wireless Spam bill, Bill C-28.  In doing so, the government delivered on a key commitment made by Prime Minister Harper to Canadians and Canadian businesses in September 2008.

The intent of the legislation is to deter the most damaging and deceptive forms of spam, such as identity theft, phishing and spyware, from occurring in Canada and to help to drive out spammers.

This law addresses the legislative recommendations of the Task Force on Spam, which brought together industry, consumers and academic experts to design a comprehensive package of measures to combat threats to the digital economy. As well the government studied successful legislative models in other countries and, based on their experiences, has developed a focused plan to address spam and related online threats.”

In his online videocast, Canada’s Industry Minister said that the passage of the Anti-spam Act was intended to “help … enhance safety and security in the online world”, “deter the most damaging and deceptive forms of spam from occurring in Canada” and “drive spammers out of Canada”.  The Minister also said that “Canadians need to feel just as confident in the electronic marketplace as they do at the corner store” and that “spam is at best a nuisance but it can also discourage electronic commerce, undermine privacy and introduce a host of online threats” (see: Minister of Industry – videocast – Government of Canada Moves to Enhance Safety and Security in the Online Marketplace).

LEGISLATIVE HISTORY

The Anti-spam Act, which was first introduced in April, 2009 and reintroduced on May 25, 2010, addresses legislative recommendations made by the Task Force on Spam (see links below), which assembled consumers, academic experts and industry to design comprehensive legislation to fight spam in the digital economy.

In 2005, the Task Force on Spam completed its one-year mandate and issued its final report (Task Force on Spam Report: Stopping Spam: Creating a Stronger, Safer Internet).  The Government also studied successful anti-spam measures in other countries.

During third reading, the amended Bill C-28 received unanimous support in the House of Commons and received Royal Assent on December 15, 2010.

ANTI-SPAM ACT – OVERVIEW

Canada’s new Anti-spam Act, which, unlike similar U.S. legislation, creates an “opt-in” regime for commercial electronic communications, amends the following federal statutes: the Canadian Radio-television and Telecommunications Commission Act, the Competition Act, Personal Information Protection and Electronic Documents Act and the Telecommunications Act.

Some of the key aspects of the new Anti-spam Act, the Regulations for which are not yet finalized, are discussed below.

Commercial Electronic Messages (CEMs)

The Anti-spam Act prohibits sending commercial electronic messages (“CEMs”) without the recipient’s express or implied consent (i.e. permission), including messages sent to e-mail addresses and social media accounts and text messages sent to cell phones.

“CEMs” are broadly defined as any electronic message that encourages participation in a commercial activity regardless of whether there is any expectation of profit.  “Electronic messages” are defined as messages sent by any means of telecommunication, including a text, sound, voice or image message (with an exception for interactive two-way voice communications – i.e., telemarketing).

CEMs must also be in a prescribed form that, among other things, identifies the person who sent the message, includes information enabling the recipient to contact the sender and includes an unsubscribe mechanism (that meets the statutory requirements).

Electronic messages that request consent to receive CEMs are also defined as CEMs and, therefore, cannot be sent unless consent is received.

When requesting consent, the following is required: (i) stating the purpose for which consent is being sought and (ii) information identifying the person seeking consent (and any other information that may be prescribed by Regulation).

Consent for section 6 of the Anti-spam Act may also be implied, including in the following cases: (i) an existing “business” or “non-business” relationship (both as defined in the Anti-spam Act), (ii) a “business card” exception (a person has published their electronic address without a statement that they do not wish to receive unsolicited CEMs) or (iii) a recipient has disclosed their electronic message to a sender without indicating that they do not wish to receive unsolicted CEMs (and the message is relevant to the recipient’s business).

There are a number of exceptions, that the Regulations when finalized will clarify, including exceptions for: (i) personal or family relationships, (ii) inquiries for commercial goods and services, (iii) providing a requested quote or estimate for goods or services, (iv) messages to complete or confirm a commercial transaction, (v) the provision of warranty, product recall or safety information, (vi) information relating to an employment relationship and (vii) two-way interactive voice communications (i.e., telemarketing).

Altering Transmission Data

The Anti-spam Act prohibits the alteration of transmission data in an electronic message, which results in the message being delivered to a different destination without express consent (e.g., causing an electronic message to be sent to a destination that is different than what the sender intended).

Misleading Representations in Electronic and Online Content

The Anti-spam Act amends the Competition Act to prohibit false or misleading commercial representations made electronically (e.g., in website headers, web links or website content).

In this regard, the criminal and civil misleading advertising provisions of the Act, as well as the related misleading advertising penalty provisions, have been broadened to expressly include misleading representations in the electronic and online environment (e.g., representations made in the sender information or subject matter information of an electronic message).

Unauthorized Installation of Computer Programs

The Anti-spam Act prohibits the installation of computer programs without the express consent of the computer system’s owner or an authorized user of the computer system (e.g., an authorized employee).

Unauthorized Collection of Personal Information

The Anti-spam Act amends the Personal Information Protection and Electronic Documents Act to prohibit the collection of personal information by means of unauthorized access to computer systems.

Collection of Electronic Addresses

Finally, the collection of electronic addresses using computer programs or using such addresses without permission (“harvesting”) is prohibited.

This may include the collection of e-mail addresses through the use of, for example, “web crawlers” (computer programs that scan websites, usenet groups and social media websites, trolling for electronic addresses) or “dictionary attacks” (where a computer program guesses real/live e-mail addresses by methodically trying various name variations within a particular group of common e-mail domains – e.g., Gmail, Hotmail, etc.).

ENFORCEMENT

The three government agencies responsible for the enforcement of the new Anti-spam Act are as follows:

The Competition Bureau (the “Bureau”) – the Bureau’s mandate will be to focus on misleading and deceptive practices and representations online, including false or misleading headers, web links and website content.  The Anti-spam Act extends the Competition Bureau’s existing jurisdiction over misleading advertising and deceptive marketing practices in Canada, which already included online advertising and marketing (under the criminal and civil misleading advertising sections of the Competition Act – sections 52 and 74.01).

The Canadian Radio-television and Telecommunications Commission (“CRTC”) – The CRTC will have the power to investigate and take action, including imposing significant administrative monetary penalties (“AMPs”), against unsolicited electronic messages (i.e., without consent), the alteration of transmission data or the installation of computer programs without consent (e.g., malware, spyware or viruses).

Office of the Privacy Commissioner of Canada (“Privacy Commissioner”) – The Privacy Commissioner will have the power to take measures against the collection of personal information through unlawful access to computer systems (i.e., contrary to federal law, such as the Criminal Code) or electronic address “harvesting” where bulk e-mail lists are compiled through mechanisms, including the use of computer programs that automatically mine the Internet for e-mail addresses.

PENALTIES

Persons contravening the Anti-Spam Act will be subject to AMPs of up to $1 million per violation for individuals and $10 million per violation for corporations.

Private individuals or organizations affected by a violation of the Anti-spam Act will also have a right to commence private actions.  In this regard, in addition to allowing awards of damages for actual loss or damage suffered a court may also order persons that contravene the Anti-spam Act to pay damages for each day on which a contravention of the new law continued – for example, for violation of section 6 (unauthorized commercial electronic messages) $200 for each contravention up to $1 million per day the contravention occurred.

The Anti-spam Act also contains broad director and officer liability provisions which provide that directors and officers of a company that commits a violation are liable for that violation if they directed, authorized, assented to, acquiesced or participated in the commission of a violation (subject to a due diligence defence).

COMING INTO FORCE

Two sets of draft Regulations have been published (CRTC Regulations on June 30, 2011 and Industry Canada Regulations on July 9, 2011), the public comment periods for the two sets of Regulations were completed on September 6 and 7, 2011 and final Regulations may come into force in late Fall 2011 or Spring 2012.

In terms of a likely timetable for implementation of the new Anti-spam Act, there has been some debate as to whether, based on comments received during the consultation periods, revised draft Regulations will be issued and whether additional public consultations may be held.

For the draft CRTC Regulations see:

Draft Electronic Commerce Protection Regulations (CRTC)

For the draft Industry Canada Regulations see:

Electronic Commerce Protection Regulations

For the Canadian Bar Association’s comments on the draft Regulations see:

CRTC Draft Regulations Consultation 2011-400

Industry Canada Anti-spam Regulations

ANTI-SPAM ACT LINKS AND RESOURCES

Legislation

Anti-spam Act

Regulations

CRTC

Draft Electronic Commerce Protection Regulations (CRTC)

Industry Canada

Electronic Commerce Protection Regulations

Canada’s Anti-Spam Website (www.fightspam.gc.ca)

Canada’s Anti-Spam Legislation

Key Facts

Enforcement

FAQs

Links and Resources

Industry Canada

Summary of the Anti-spam Act (Canada’s Anti-Spam Legislation)

Industry Canada Q&A

Industry Canada News Releases

“Government of Canada Protects Canadians with the Electronic Commerce Protection Act” (April 24, 2009)

“Anti-Spam Legislation is Unanimously Passed by the House of Commons” (December 2, 2009)

“Harper Government is Getting Things Done for Canadians” (December 15, 2010)

Industry Canada Backgrounders

Anti-Spam Legislation Receives Royal Assent

Government of Canada Introduces Amendments to the Personal Information Protection and Electronic Documents Act (PIPEDA)

Industry Canada Spam Definitions

Online Threats

Canadian Task Force on Spam

Task Force on Spam

Stakeholder Roundtable

Roundtable Meeting with Key Stakeholders

Reports

An Anti-Spam Action Plan for Canada (May, 2004)

Stopping Spam: Creating a Stronger, Safer Internet (May, 2005)

The Guide, the first book of its kind in Canada, will be a practical and concise summary of Canadian competition law as it applies to trade, professional and other associations.  It will include an overview of the major areas of Canadian competition law that apply to associations, including the conspiracy, bid-rigging, abuse of dominance and misleading advertising provisions of the federal Competition Act.

The Guide will also include discussions of some of the specific types of association activities that can raise competition law concerns including membership criteria and discipline, codes of conduct and standard setting, meetings and information exchanges and joint association activities (e.g., joint negotiation and marketing, joint purchasing activities and lobbying and advocacy). A compendium of “best practices” (i.e., do’s and don’ts) will also be provided together with sample guidelines for the conduct of association meetings, document creation and responding to government investigations (principally search and seizures).  Basic sample association compliance presentations for associations will also be included.

The Guide is intended to provide a practical resource for trade and professional association executives, their personnel and counsel to better understand Canadian competition law as it applies to association activities and to assist them in anticipating and reducing potential competition law liability.

For more information about this forthcoming book see Carswell’s product catalogue:

The Competition Law Guide for Trade Associations in Canada

Carswell will also be offering an online webinar in November in conjunction with the publication of the Guide.  For more information see:

West LegalEdcenter – A Guide to Canadian Competition Law for Trade and other Associations