April 24, 2013
The British Columbia Real Estate Council issued its new Report from Council Newsletter, which includes a summary of the new and updated advertising requirements for British Columbia real estate licensees (see: here). The Council’s new newsletter states:
“Each month, the Real Estate Council receives a large number of complaints relating to licensee advertising. In order to reduce the number of complaints, the Council has updated its advertising requirements with several pictorial examples, an easy to use Advertising Checklist, and Guidelines for Common Online and Social Media Websites. A link to the updated advertising requirements can be found here.
The Council’s advertising requirements are intended to ensure the public is neither misled nor confused as to who is providing real estate services and to ensure the accuracy of representations being made about real estate and real estate services. The Council Rules define real estate advertising as ‘any form of identification, promotion, solicitation or representation relating to real estate, a trade in real estate, or the provision of real estate services, including a sign or other notice relating to real estate, a trade in real estate or the provision of real estate services.’”
April 23, 2013
There has been quite a bit of debate recently in Canada about the pros and cons of regulation. Some of the highlights of this debate have included announcements by the Competition Bureau that it is stepping up its advocacy efforts in certain regulated sectors (e.g., health, wireless, etc.) (see: here), calls by some policy groups (e.g., the CD Howe Institute) to more closely scrutinize anti-competitive restraints insulated by the “regulated conduct doctrine” (see: here) and a vigorous ongoing debate in the wireless sector about the level of appropriate regulation and extent to which Canada’s large three incumbent carriers should be insulated from foreign competition.
In this context, this note in the Edmonton Journal caught my eye discussing an ongoing debate in Alberta about whether to allow or block loyalty programs for drug purchases (e.g., Air Miles, Aeroplan, Optimum points, etc.): Frills for pills tarnish profession, say Edmonton pharmacists who support ban.
According to the Journal, the debate has involved some large retailers on one side (e.g., Safeway, Shoppers Drug Mart, etc.) who support inducements/loyalty programs for drugs, while others oppose the idea based on potential adverse impacts on patient care, pharmacist workload or the image of pharmacists in the province.
I thought this debate was interesting for a few reasons (according to the Journal, the Alberta College of Pharmacists, which regulates pharmacists in Alberta, is planning to move ahead with a prohibition of some kind on inducements for drugs).
The story highlights the fact that advertising restraints (like other types of competition restraints, such as relating to price, output, etc.) can be insulated from competition challenges when they are lodged in valid provincial or federal legislation (based on Canada’s “regulated conduct doctrine”). As such, this pharmacist marketing debate in Alberta raises the question of whether legislation should be used to remove market forces that would otherwise allow innovation or changes in pharmacists’ marketing.
Competition & Associations: Singapore Modeling Agencies Largely Unsuccessful on Appeal of Price-fixing Fines, Cautionary Tale for “Recommended” Fee Guidelines
April 22, 2013
In an interesting trade association related case that caught my eye today, the Competition Commission of Singapore (CCS) has announced that Singapore’s Competition Appeal Board (CAB) has largely upheld penalties against 11 modeling agencies that had engaged in illegal price-fixing activities relating to the supply of modeling services (see: CAB Dismissed Most Grounds of Appeal by Modelling Agencies).
In this case, in which the accused modeling agencies had attempted to characterize their actions as mere price guidelines issued by a trade association called the “Association of Modelling Industry Professionals”, the Competition Commission found that the AMIP was merely a “front for its individual members to coordinate on, and collectively raise, rates for modeling services in Singapore.” According to the CCS, the associations’ member modeling agencies had fixed rates for a wide range of modeling related services, which included editorials, advertorials, fashion shows and media loading usage (which adversely impacted publishers, photographers, show organizers, fashion labels and others).
On appeal to the CAB, the modeling agencies made a number of arguments for a reduction in penalty, which were largely dismissed (reducing the original penalty of about $291,000 to about $243,000).
While a technical appeal on the amount of damages not the CCS’ earlier finding of liability, some of the points from the CAB’s decision and case that I found interesting include: the fact that the agencies’ initial discussions on modeling service rates led to the formation of the AMIP as a cover for their price-fixing activities; an initial agreement for commission rates for models that was later expanded into agreed rates for fashion shows, ushering, mingling, fitting and show casting rates, among others; recommendations by association executives for more modest rate increases to reduce the risk of a price-fixing complaint; and an attempted strategy of sending individual price increase letters (and substituting association logos with individual company logos) to avoid detection.
Record $30 M Bid-rigging Fine Announced Against Yazaki Corp. in Auto Parts Case, Follows 2nd Largest Sherman Act Fine ($470 M) Against Same Company
April 18, 2013
On April 4th, the Competition Bureau announced what was at the time a record bid-rigging fine in Canada of $5 million (see: Japanese Motor Vehicle Component Supplier to Pay Record $5 Million Bid-rigging Fine).
Earlier today, the Bureau announced that Yazaki Corporation, a Japanese supplier of motor vehicle components, was fined $30 million by the Ontario Superior Court of Justice, for participating in a bid-rigging cartel involving motor vehicle components. In particular, the Bureau’s allegations in this case, in which Yazaki plead guilty to bid-rigging under the Competition Act, were that Yazaki coordinated bids with competing suppliers of wire harnesses supplied to Honda and Toyota (with an affected volume of Canadian commerce of approximately $260 million).
In making the announcement, the Interim Commissioner said:
“Cartelists must be penalized for defrauding Canadians. … The record fine in this matter underscores the seriousness of bid-rigging offences and sends a strong message that companies need to comply with the law.”
The Bureau reiterated that it is relying on its Immunity and Leniency Programs in this case and is cooperating in its ongoing auto parts investigation with international antitrust agencies, including in the United States, European Union, Japan and Australia.
In the U.S. in January, 2012, Yazaki plead guilty with DENSO Corporation and agreed to pay a total of $548 million in relation to the sale of auto parts in the United States (see: here). Yazaki agreed to pay a $470 million fine, the second largest criminal fine for a Sherman Act antitrust violation. Four Yazaki executives were sentenced to imprisonment ranging from 15 months and two years.
Some antitrust enforcement officials have described the ongoing auto parts cartel as a decade-old “keiretsu” of price-fixing and project allocation among some of the largest and most venerable auto parts suppliers in Japan, and which may involve upward of 60 or more products. A “keiretsu” is a Japanese word that, if translated literally, means a “headless combine” and is a term used to refer to a type of corporate structure in which multiple organizations combine, often by taking small holdings in one another.
As of January, 2013, the U.S. DoJ’s Antitrust Division alone had collected nearly $800 million in fines from its investigation (including the record $470 million against Yazaki).
Competition Tribunal Releases Toronto Real Estate Board (TREB) Abuse of Dominance Decision – Dismisses Bureau’s Case
April 16, 2013
Yesterday, the Competition Bureau announced that the Federal Competition Tribunal had dismissed its 2011 abuse of dominance application against The Toronto Real Estate Board (see: Competition Bureau to Review Competition Tribunal Ruling). For an overview of the case see: here.
The Competition Tribunal has now issued its decision, which now sheds light on the reasoning for its dismissal of the Bureau’s abuse case against Canada’s largest real estate board (see: The Commissioner of Competition v. The Toronto Real Estate Board).
In a brief seven page decision, the Tribunal has dismissed the Bureau’s application with costs to TREB concluding, rather bluntly, that “subsection 79(1) [the abuse of dominance provision of the Competition Act] does not apply on the facts of this case.” Having come to that conclusion, the remainder of the issues and arguments made by the Bureau were not considered by the Tribunal.
In a significant and long running abuse of dominance application, which has been ongoing now some two years, this must have come as a bit of a shock to the Bureau, to say the least.
One of the things that first occurred to me as well was whether the earlier abuse challenge against The Canadian Real Estate Association (CREA), which was settled in late 2010, might have met with the same favorable result if it had been pressed forward to the Tribunal (given that that case, like the current TREB challenge, involved abuse theories of harm related to allegedly restrictive CREA MLS rules).
As a general matter, this decision also shows that it is not always clear whether allegedly anti-competitive conduct, whether in the trade or professional association context or otherwise, should be challenged under sections 79 (abuse of dominance), 45 (conspiracy agreements), the new civil agreements provision (section 90.1) or other provisions of the Competition Act. Indeed, the same conduct can (and sometimes is) challenged under multiple provisions of the Act. To illustrate this point, the current TREB challenge included both a civil abuse of dominance challenge by the Bureau (under section 79 of the Competition Act) and a private civil action grounded, among other things, on criminal conspiracy theories under section 45 of the Act.
The following are some key points from the Tribunal’s decision:
TREB does not compete in the relevant market. Without expressing an opinion on TREB’s potential market power, the Tribunal found that even if market power were established in this case it could not meet the first branch of the test for an abuse of dominance (market power in a relevant market) because TREB did not compete in the relevant market (the provision of residential real estate services in the Greater Toronto Area). This was one of the central arguments made by TREB (i.e., as a real estate board it did not compete with its members), and accepted by the Tribunal in dismissing this application.
TREB’s rules cannot have a negative effect on a competitor. With respect to a practice of anti-competitive acts (the second of three necessary elements to establish an abuse of dominance under section 79), the Tribunal found that the Bureau’s application did not follow the Federal Court’s decision in Canada’s leading abuse of dominance case - Canada Pipe. The Federal Court in Canada Pipe, and earlier Tribunal decisions, have held that it is necessary to show “an intended negative effect on a competitor that is predatory, exclusionary or disciplinary”. In this regard, as the Tribunal put it, “since TREB admits and the Commissioner and CREA agree that TREB does not compete with its members, TREB’s Restrictions cannot have the negative effect on a competitor required by [Canada Pipe].”
Interpreting the Competition Act’s examples of anti-competitive acts as consistent with the holding in Canada Pipe. Also related to the second branch of the test (a practice of anti-competitive acts), the Tribunal also rejected arguments made by the Bureau that there can be anti-competitive acts that do not involve harm to a competitor. For example, one of the anti-competitive acts listed in section 78 of the Act (paragraph 78(1)(f)) does not specify that a competitor must be harmed. In rejecting the Bureau’s argument, the Tribunal held:
Toronto Real Estate Board Abuse of Dominance Case: Competition Bureau Announces Initial Defeat: Tribunal Dismisses Application
April 15, 2013
Earlier today, the Competition Bureau announced that the Federal Competition Tribunal has dismissed its 2011 abuse of dominance application against The Toronto Real Estate Board and that it would be “reviewing” the Tribunal’s decision (see the Competition Bureau’s news release: Competition Bureau to Review Competition Tribunal Ruling).
In making the announcement, Canada’s Interim Commissioner of Competition, John Pecman, said: “While I am disappointed that the Tribunal has dismissed the Bureau’s application, we will be reviewing the Tribunal’s decision to determine our next steps.”
In this case, the second recent abuse of dominance challenge against major Canadian real estate boards or associations (an earlier challenge against The Canadian Real Estate Association was settled in the fall of 2010), the Bureau brought an application challenging certain membership rules enacted by The Toronto Real Estate Board.
In particular, the Bureau alleged that TREB was dominant in the residential real estate services market in the GTA, that certain membership rules enacted by it governing the use of its MLS® data were anti-competitive and that competition had been substantially lessened in the residential real estate services market in the GTA. The Bureau specifically challenged TREB membership rules governing the use of its MLS® data, which it argued make it impossible for existing members or new entrants to offer certain Internet based services that rely on the use of the Board’s MLS® data. Like the CREA case, the Bureau’s application focused on TREB’s ability to exclude and discipline non-compliant members by foreclosing access to its MLS® system.
New U.S. FTC Report With Competition and Advertising Highlights For the Past Year, Parallels to Competition Bureau Enforcement and Priorities
April 12, 2013
Earlier today, the U.S. Federal Trade Commission released 2013 Annual Highlights setting out its priorities over the past year, which generally include promoting online privacy and data security, fostering competition in high-tech industries and healthcare and protecting children and other vulnerable consumers from fraud.
In making the announcement, FTC Chairwoman Edith Ramirez said: “As we head into our second century, the FTC is dedicated to advancing consumer interests while encouraging innovation and competition in our dynamic economy.”
The FTC’s report summarizes its work in eleven general categories, including protecting consumer privacy, containing health care and drug costs, fostering innovation and competition, bringing challenges to deceptive advertising and marketing and protecting children.
Some of the interesting competition and deceptive advertising highlights of the FTC’s new report include:
- Enforcement statistics that include: enforcement actions that have focused on health care (31%), manufacturing (27%), pharmaceuticals (15%) and retail (14%); redress and disgorgement orders totaling $741.5 million; civil penalties totaling $63.6 million; and top consumer protection penalties of $478.9 million (John Beck), $40 million (Skechers USA, Inc.), $38.5 million (U.S. Mortgage Funding, Inc.) and $22.5 million (Google). Canada’s maximum penalties for misleading advertising (up to $10 million) look rather tepid by comparison. I also found it interesting that the FTC received more than two million consumer complaints (compared to about 20,000 received by the Competition Bureau last year).
- A discussion of the state action doctrine and, in particular, its challenge to the hospital merger-to-monopoly in FTC v. Phoebe Putney Health System, Inc. (raising the issue of whether the Georgia legislature had shielded the local hospital authority from federal antitrust review), in which the Supreme Court found that there was no evidence that the legislature contemplated that the hospital authorities would displace competition by consolidating hospital ownership. The Canadian Competition Bureau has also stepped up its interest in regulated markets and indicated that it intends to revisit Canada’s “regulated conduct doctrine” (RCD) in light of, among other things, recent criticism that excessive regulation in Canada and an uncertain RCD are impeding competition and limiting production.
April 11, 2013
In recent news that may serve as a cautionary tale for telemarketers, the Canadian Radio-television and Telecommunications Commission (CRTC) recently announced that Comwave Telenetworks Inc. has paid a $100,000 penalty as part of a settlement for telemarketing practices involving the National Do Not Call List (DNCL) rules (which are a subset of the CRTC’s Unsolicited Telecommunications Rules).
According to the CRTC, its investigation found that, while the company did subscribe to the DNCL, there were months where it did not download an updated list. This resulted in the organization’s independent dealers calling numbers that were DNCL registered.
A financial penalty was not the only consequence of this violation. Although Comwave decided to end its telemarketing practices, if it does recommence telemarketing in the future, it has agreed to take a number of steps, including: review its compliance programs (and appointing a compliance officer to ensure compliance with the DNCL); implement training and education programs for staff; and provide an annual report to the CRTC documenting consumer complaints and steps taken to resolve them.
As the CRTC points out, the case provides a good opportunity to note that not only must telemarketers register with the National DNCL but also be sure to keep their subscriptions current. Telemarketers and third-party agencies are required to follow the DNCL rules.
Some DNCL basics include:
1. All telemarketers must register with the DNCL at www.LNNTE-DNCL.gc.ca (even if only making exempt calls or sending exempt faxes). Registration lasts for 12 months.
2. Regular telemarketers (i.e., who make telemarketing calls or send faxes to consumers for solicitation or hire a third-party agency to make calls), have to purchase a subscription for the area codes to be called (fees are based on subscription models). Numbers must then be downloaded from the DNCL and deleted from calling lists, using a version of the DNCL less than 31 days old.
3. Exempt telemarketers (e.g., registered charities raising funds, newspapers seeking subscriptions and political parties and candidates) must register, but are exempt from the DNCL (but are still required to maintain internal do not call lists).