“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)
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OVERVIEW
In general, predatory pricing occurs where a dominant firm sets its prices below some measure of cost for a period of time sufficient to eliminate, discipline or deter new entry by a competitor, in order to recoup its losses by charging prices above the competitive level that would have prevailed with the competitor still in the market.
Before 2009, predatory pricing could be challenged in Canada under the federal Competition Act both by private plaintiffs or the Competition Bureau under a standalone criminal predatory pricing provision of the Competition Act or by the Competition Bureau under the civil abuse of dominance provision of the Competition Act (section 79).
In 2009, the former criminal predatory pricing provision was repealed and predatory pricing could only be challenged by the Competition Bureau under section 79 of the Competition Act (abuse of dominance). Then, following significant amendments made to the Competition Act that came into force on June 23, 2022, private access applications to the Competition Tribunal (i.e., the ability of private parties, and not only the Competition Bureau, to commence Competition Tribunal applications) were extended to include abuse of dominance under section 79. Prior to this amendment, only the Competition Bureau could commence abuse of dominance applications before the Competition Tribunal.
Predation cases in Canada, however, are relatively uncommon and there have only been a handful of civil and criminal predatory pricing cases in Canada since the modern Competition 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 of the Competition Act (under which there has only been a relatively small number of fully contested cases since 1986) and the scope and meaning of subparagraph 78(1)(i) of the Competition Act, which contains a standalone predation provision that makes it a reviewable practice (i.e., civil matter subject to administrative monetary penalties (AMPs)) 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, all of the elements of section 79 of the Competition Act must be established by the Competition Bureau or by a private party (with leave from the Competition Tribunal under section 103.1 of the Competition Act) on an application to the Competition 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, is preventing or lessening competition substantially or is likely to do so.
Where an abuse of dominance is established, the Competition Tribunal has the power to make a number of types of orders, including civil AMPs of up to the greater of $10 million ($15 million for each subsequent order), three times the value of the benefit obtained from the abusive conduct or, if the latter amount cannot be reasonably determined, 3% of the corporation’s annual worldwide gross revenues.
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SERVICES AND CONTACT
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