“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.”
(Commissioner of Competition v. Visa and MasterCard)
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.
The Competition Act (the “Act”) contains several civil “resale price maintenance” provisions. Under section 76 of the Act, the following may be subject to a Tribunal order:
1. For a supplier of goods or services to influence a customer or reseller to raise its prices or discourage the reduction of prices, by agreement, threat promise or “any like means”, 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 by agreement, threat, promise or “any like means”, 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 Act was amended in 2009, price maintenance was a “per se” criminal offence. In other words, price maintenance was a criminal offence subject to fines and/or imprisonment that required no market effects in order to be established. The new price maintenance provisions now require that market effects be shown – i.e., an adverse effect on competition in a market.
There has been one decided civil price maintenance case to date brought by the Competition Bureau (the “Bureau”) under the amended 76 relating to Visa and MasterCard merchant fees. For a summary and link to the case see: here.
The Bureau also recently issued new Price Maintenance Enforcement Guidelines, which set out the Bureau’s approach to enforcing section 76. The Bureau’s new Enforcement Guidelines discuss, among other things, the required elements to establish price maintenance under section 76; the required market effects (i.e., that it be established that competition is adversely affected in a market); and several common commercial practices, including minimum resale pricing, manufacturer-suggested resale pricing (MSRP) and minimum advertised pricing (MAP).
There are several exceptions under section 76. For refusals to supply, the Tribunal cannot make an order regarding a supplier’s refusal to supply (or discrimination) where a retailer engaged in (i) loss leadering; (ii) bait-and-switch selling; (iv) misleading advertising; or (iv) failed to provide a level of service that purchasers might reasonably expect. The Tribunal may also not make an order where the parties are principal and agent, affiliates or representatives of the same entity or affiliated entities.
ENFORCEMENT AND PENALTIES
Under the new price maintenance provisions of the Act, the Bureau or private parties granted leave to bring an application to the Tribunal may commence price maintenance applications seeking remedial orders.
The Tribunal may order that price maintenance conduct stop or, in the case of a refusal to deal under section 76, 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, either to the Bureau or private parties that have obtained leave from the Tribunal to make private price maintenance applications. Also, like the other civil reviewable matters under the Act, no damages actions may be commenced for violations of section 76.
The routes to a remedy under section 76 are, therefore, the following: a complaint made to the Bureau in which the Bureau makes a price maintenance application to the Tribunal (or negotiates a remedy with the party being investigated); a price maintenance application brought before the Tribunal by the Bureau directly; or by a private party that brings a Tribunal application with leave obtained from the Tribunal.
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