“Price maintenance may occur when a supplier prevents a customer from selling a product below a minimum price by means of a threat, promise or agreement. It may also occur when a supplier refuses to supply a customer or otherwise discriminates against them because of their low pricing policy.”
(Competition Bureau, pamphlet, Setting Your Own Price)
“In a typical price maintenance case, the analysis of whether prices have been influenced upwards is relatively uncomplicated. For example, a manufacturer sets a minimum price at which its dealers may sell its product. This price is above the price at which its dealers would otherwise sell the product thereby directly influencing its resale price upward. It necessarily prevents resellers of the product from competing with each other by cutting their prices below the stipulated minimum price. While resale price maintenance softens intra-brand price competition downstream, it can increase the incentive for resellers to engage in non-price inter-brand competition and can therefore be demand-increasing. In this case there would be an upward influence on price but no adverse effect on competition. Under some circumstances, however, resale price maintenance can reduce both intra-brand and inter-brand competition and is demand-restricting as a consequence. In this case there would be both an upward influence on price and an adverse effect on competition.”
(The Commissioner of Competition v. Visa and MasterCard (2013))
OVERVIEW OF PRICE MAINTENANCE
The Competition Act contains several civil “resale price maintenance” provisions that, generally speaking, allow the Competition Bureau (or private parties in some instances with leave from the Tribunal) to seek Competition Tribunal remedial orders.
In particular, under section 76 of the Competition Act, the following are “reviewable practices” (i.e., civil matters):
1. For a supplier of goods or services to influence a customer or reseller to raise its prices (or discourage the reduction of prices) and competition is adversely affected;
2. To refuse to supply goods or services to a person, or otherwise discriminate against them, based on their low pricing policy and competition is adversely affected; or
3. To induce a supplier, as a condition to dealing with the supplier, to refuse to supply a product to another person because of that other person’s low pricing policy and competition is adversely affected.
Before the Competition Act was amended in 2009, price maintenance was a “per se” criminal offence (i.e., no market effects were needed to be proven), which was subject to criminal fines and imprisonment.
Following the 2009 amendments to the Competition Act, section 76 is now a civil reviewable practice that allows the Competition Tribunal to make orders for price maintenance conduct to stop or, in the case of refusals to supply, to order a supplier to accept a person as a customer within a specified period of time on usual trade terms. No civil fines (i.e., “administrative monetary penalties”) are available under section 76.
The new price maintenance provisions also now require that adverse market effects be shown – i.e., an adverse effect on competition in a market. In this regard, the Competition Bureau has taken the position that a supplier must generally have some degree of market power before price maintenance can be found to have an adverse effect on competition (with relevant factors that may include the supplier’s market share, existence of barriers to entry and a lack of substitute products).
There has been one decided civil price maintenance case to date under the amended provisions, involving the Competition Bureau’s challenge to Visa and MasterCard and merchant credit card fees (for a summary and link to the case see: here).
LINKS AND RESOURCES
Legislation: Competition Act – Competition Bureau: Competition Bureau – Pamphlets: Setting Your Own Price (Competition Bureau Pamphlet)
For information about my regulatory services: contact
For more regulatory law updates follow me on Twitter: @CanadaAttorney
Visit my Google+ page for more updates: Canadian Competition & Regulatory