“The Bureau considers predatory pricing to be a firm deliberately setting prices to incur losses for a sufficiently long period of time to eliminate, discipline, or deter entry by a competitor, in the expectation that the firm will subsequently be able to recoup its losses by charging prices above the level that would have prevailed in the absence of the impugned conduct, with the effect that competition would be substantially lessened or prevented.”
(Competition Bureau, Predatory Pricing Enforcement Guidelines)
MAJOR COMPETITION LAW COMPLIANCE UPDATE: On June 3, 2015, the Competition Bureau (Bureau) finalized its new core competition law compliance materials. The Bureau’s new compliance materials, which include information on most major competition law areas, misleading advertising, associations and the Bureau’s Leniency Program, are essential reading for corporate compliance officers, senior management and in-house and general counsel. For an overview of the developments (with links) see: Canadian Competition Law Compliance Programs.
Generally speaking, predatory pricing occurs where a dominant firm intentionally sets its prices below some measure of cost for a period sufficient enough to eliminate, discipline or deter new entry by a competitor, with the objective of recouping its losses by charging prices above the level that would have prevailed with the competitor still in the market.
Before 2009, predation could be challenged in Canada both by private plaintiffs (or the Competition Bureau) under a standalone criminal predatory pricing provision of the Competition Act (the “Act”) or by the Bureau under the abuse of dominance provision of the Act (section 79).
Following significant amendments made to the Act in 2009, predatory pricing can only be challenged by the Bureau under section 79 of the Act as one form of abuse of dominance.
Predation cases in Canada are rare and there have only been a handful of civil and criminal predatory pricing cases in Canada since the modern Act was introduced in 1986.
In this regard, a number of key predatory pricing law issues remain to be settled in Canada including the appropriate measure of cost, issues generally relating to the application and scope of section 79 (under which there has only been about ten contested abuse cases in twenty-five years) and the scope and meaning of subparagraph 78(1)(i) of the Act, which contains a standalone predation provision that makes it a reviewable practice for a dominant firm to sell articles at a price lower than acquisition cost to discipline or eliminate a competitor.
To establish that a firm has engaged in predatory pricing, the elements of section 79 of the Act must be established by the Bureau on an application to the Competition Tribunal (“Tribunal”) – i.e., that a dominant firm (or firms – section 79 includes joint dominance) has engaged in a practice of anti-competitive acts (i.e., predatory pricing conduct) that has prevented or lessened competition substantially (or is likely to do so).
Where an abuse of dominance is established, the Tribunal has the power to make a number of types of orders, including for the conduct to stop or for a firm to pay “administrative monetary penalty” of up to $10 million ($15 million for subsequent orders).
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