Archive for the 'Competition Bureau' Category
CCH has reported that the Competition Bureau is set to close three offices.
From CCH:
“As part of the federal government’s recent austerity measures, the Competition Bureau will be closing three regional offices in 2013, sources report.
Offices in Hamilton, Halifax, and Calgary are slated for closure, affecting approximately 30 employees. These locations deal primarily in Fair Business Practices branch enforcement matters such as mass marketing fraud, deceptive telemarketing, deceptive prize notice, and pyramid scheme /multi-level marketing cases. (Editor)”
For more posts from CCH’s competition law blog see:
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Steve Szentesi & Mark Katz
(First published in Competition Policy International, Antitrust Chronicle)
“As a result of this alleged conspiracy, we believe that consumers paid millions of dollars more for some of the most popular titles. We allege that executives at the highest levels of these companies—concerned that e-book sellers had reduced prices—worked together to eliminate competition among stores selling e-books, ultimately increasing prices for consumers.”
(Attorney General Eric Holder, April 11, 2012)
“This was competition on the merits, with Apple providing a superior reading platform on a beautiful 10 inch iPad screen, with color, multi-media, and fixed display, and access to millions of future iPad purchasers. This is classic procompetitive behavior that should be celebrated, not condemned through litigation.”
(Apple Answer, May 22, 2012)
“Absent any direct evidence of conspiracy, the Government’s Complaint is necessarily based entirely on the little circumstantial evidence it was able to locate during its extensive investigation, on which it piles innuendo on top of innuendo, stretches facts and implies actions that did not occur and which Macmillan denies unequivocally. For the record, Macmillan did not conspire with other publishers in New York City restaurants.”
(Macmillan Answer, May 29, 2012)
INTRODUCTION
Before the U.S. Department of Justice (“DOJ”) filed its claim in the eBooks case earlier this year, Canadian class action plaintiffs commenced their own proceedings in the provinces of British Columbia, Ontario, and Quebec.[1]
As in the United States, the Canadian actions are challenging the agency eBook distribution model adopted by Apple and five of the world’s largest book publishers.[2] Specifically, the Canadian plaintiffs allege that Apple and the defendant publishers violated Canada’s price-fixing offense under section 45 of the Competition Act (the “Act”). The publishers allegedly committed the offense by collectively agreeing to discontinue their former wholesale distribution models, under which publishers sold eBooks at wholesale prices to distributors who in turn set retail prices, for a new agency model under which publishers set prices with distributors receiving sales commissions.[3]
The Canadian plaintiffs also allege that the publisher defendants illegally agreed not to set eBook prices below Apple’s iBookstore prices (a “most-favored-nation” provision). Finally, the plaintiffs plead a variety of non-statutory grounds for recovery, including certain common law torts (e.g., unlawful interference with economic relations) and—in Québec—claims under the Civil Code of Québec.[4]
As in the United States, the key substantive issue in Canada will be whether the conduct of Apple and the defendant publishers constitutes an illegal conspiracy. In addition, the case raises some uniquely Canadian issues relating to jurisdiction and certification and the interpretation of Canada’s conspiracy offense.
Before addressing these various questions, we provide a brief summary of the competition class action regime in Canada for background purposes.
A few interesting competition, advertising and regulatory law developments caught my eye today including:
The Competition Bureau published its May Report of Concluded Merger Reviews including Glencore/Viterra (3 advance ruling certificates and 16 no action letters): Monthly Report of Concluded Merger Reviews – May.
The ABA, Antitrust Section has launched new e-book: Handbook of U.S. Antitrust Sources: ABA – Handbook of U.S. Antitrust Sources.
Canadian Lawyer Magazine published a rather good article on corporate anti-corruption policies (which caught my eye given our work in the competition law compliance program area): Why Boards Need to Pay More Attention to Anti-Corruption Policies.
The CBA is offering an advertising law compliance seminar on June 19th entitled “Truth in Advertising 101: Tips for In-House Counsel”. For registration information see: Truth in Advertising 101: Tips for In-House Counsel.
The Canadian Real Estate Association, together with its U.S. counterpart the National Association of REALTORS, are making a play for the Top Level Domain (TLD) .REALTOR for their members: The Canadian Real Estate Association Partners with the National Association of REALTORS in its Application for .REALTOR Top Level Domain Extension.
The Globe has reported on a Wal-Mart review of the world’s greatest corruption risk jurisdictions (Brazil, China, India, South Africa and Mexico): Wal-Mart Bribery Review Flags Brazil and China as Corruption Risks.
The British Columbia Real Estate Association (BCREA) published its May 2012 Connections newsletter (featuring advocacy news and BCREA’s government relations activities) with updates on disclosure and remediation for properties used in drug operations, new legislation to help solve strata disputes and information for REALTORS for the move back to the PST: BCREA – Connections – May 2012.
Constantine Cannon has written an interesting note on the recent National Football League Players Association collusion claim against the NFL, its clubs and team owners alleging a concerted arrangement for a $123 million per-Club salary cap for the 2010 season: Players Charge NFL Imposed Collusive Salary Cap.
The 1709 Blog posted an interesting update on French publishers’ settlement with Google in the Google Book Search Project case: Some French Fresh Air to the Google Books Project.
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I had a chance today to look through some of the responses to the Bureau’s public consultations on its Revised Draft Abuse of Dominance Enforcement Guidelines. The Bureau issued new draft Abuse Guidelines for public comment on March 22, 2012.
Comments have now been posted, including by the American Bar Association (joint comments by the ABA’s Sections of Antitrust and International Law – see my earlier post: here), the National Competition Law Section of the Canadian Bar Association, Canadian Chamber of Commerce and C.D. Howe Institute Competition Policy Council.
Some of the more interesting points made in the various submissions include:
“Minimalist approach”. Concerns have generally been expressed with the “minimalist” approach taken by the Bureau in its revised draft Guidelines, which are substantially shorter and provide conspicuously less guidance than its earlier 2009 draft.
Market power. Recommending increased guidance on the degree of market power required to meet the “substantially or completely control” test (i.e., dominance) under the first branch of section 79.
Safe harbours. Suggesting that the Bureau adopt bright-line safe harbours for single and joint-firm conduct of 50% and 75% (the Bureau’s position in the current draft is that a market share between 35% and 50% will not give rise to a presumption of dominance, but “may be examined by the Bureau depending on the circumstances”, in contrast but more pro-firm friendly, to its position in its earlier draft that a share of 35% or higher would normally prompt continued investigation). The CBA Competition Section has advocated that the Bureau adopt an “unambiguous single-firm safe harbor market share threshold of 50%”.
Joint dominance. Concerted calls for the Bureau to provide increased guidance as to what in its view will constitute joint dominance under section 79, particularly what it considers necessary to establish the requisite linkage between firms to be considered to be jointly dominant (with the CBA Competition Section suggesting that coordination or tacit agreement should be required as a minimum for a finding of joint dominance).
Anti-competitive acts, intent and business justifications. Calling for increased guidance as to what it considers will constitute anti-competitive acts and intent, justification for a departure from established case law that an anti-competitive act must be intended to have a negative effect on a competitor and to restore guidance relating to legitimate business justifications (the subject of somewhat brief and cryptic comments by the Federal Court though significantly more commentary previously by the Bureau than in the current draft). With respect to legitimate business justifications, the various comments criticize the considerably pared down discussion by the Bureau of what will constitute a legitimate business justification for conduct that may otherwise constitute an anti-competitive act (which has been held by the Federal Court to be one factor that may offset otherwise anti-competitive acts for the second branch of the test under section 79).
Exclusionary acts and raising rivals costs. Criticizing the Bureau for withdrawing its previously more detailed guidance (in its 2009 draft Guidelines) relating to exclusionary acts and raising rivals’ costs. The earlier draft Guidelines, for example, provided detailed appendices setting out conduct previously found by the Tribunal to be anti-competitive, as well as significantly more detailed discussions by the Bureau previously of anti-competitive acts.
Predatory conduct. Suggesting that increased guidance from the Bureau would be helpful relating to its position on predatory pricing, including how it will implement a price-cost screen and situations that may not warrant enforcement. There have only been a handful of predatory pricing cases in Canada in the past twenty-five years since the introduction of the modern Competition Act, and significant questions remain including the appropriate measure of cost and legitimate justifications for below cost pricing.
Anti-competitive effects (SLC). Calling for increased analysis of how the Bureau will apply the “but for” test for a substantial lessening of competition, set out by Canada’s Federal Court in Canada Pipe – in the CBA Competition Section’s words, while “… the ‘but for’ analysis is conceptually simple, the practical application of this test is complex” (and remains unclear in Canada).
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Promotional contests in Canada are largely governed by the Competition Act, the Criminal Code, privacy legislation and the common law of contract. In addition, Quebec has a separate regulatory regime governing contests and contest authority (the Régie des alcools, des courses et des jeux). Canadian federal anti-spam law (CASL) also commonly applies to contests run in Canada (see below).
The Toronto Sun has reported that the federal Competition Bureau has commenced an investigation into alleged price-fixing activities among concrete companies in the Greater Toronto Area home-building industry.
According to the Bureau, it is investigating businesses in the residential concrete forming industry in the Greater Toronto Area (companies that create basement foundations for residential homes). In addition to contractors, the allegations appear to include a trade association, the Residential Low Rise Forming Contractors Association of Metropolitan Toronto and Vicinity (the LRFA). Also according to Bureau officials, criminal searches have been conducted in the Toronto area.
Under section 45 of the Competition Act, three types of agreements between competitors are “per se” illegal (i.e., with no adverse competitive impacts required to be proven): (i) price-fixing agreements (agreements to fix, maintain, increase or control the price for the supply of a product or service), (ii) market allocation/division agreements (agreements to allocate sales, territories, customers or markets for the production or supply of a product) and (iii) output/supply restriction agreements (agreements to fix, maintain, control, prevent, lessen or eliminate the production or supply of a product). Other types of agreements between competitors are potentially subject to review under a second and separate non-criminal reviewable matters agreement provision (section 90.1).
The construction industry has long been a target of competition/antitrust regulators. For example, some of the construction related cases in Canada, many of which have also involved trade associations and have gone back about a century, have included building contractors, corrugated metal pipe manufacturers, electrical contractors, gypsum dealers and manufacturers, plumbing contractors, road surfacing contractors, chain link fence contractors, among others.
Howard Ullman (mydistributionlaw.com) has written a rather good note on “The ‘top fives’ Concerning Antitrust Compliance Progams” (reprinted with permission).
Given the stepped up enforcement in Canada over the past few years, and the close parallels in enforcement priorities between Canada and the U.S., I thought this was a rather good note to post.
For an overview of competition law compliance in Canada please see our competition law compliance overview: Competition Compliance.
The “Top Fives” Concerning Antitrust Compliance Programs
There are a number of lengthy articles about antitrust compliance programs. This quick post will give you short answers to three questions: (i) why should you have a compliance program? (ii) what features should a program have? and (iii) what red flags should you look for when auditing or reviewing compliance?
Top Five Reasons to Have a Compliance Program
1. It’s the right thing to do, isn’t it? Integrity is important to virtually all businesses.
2. It may help avoid a substantial problem and subsequent expensive litigation.
3. In the criminal price-fixing or bid-rigging context, under the United States Sentencing Guidelines (2011), a corporation’s “culpability score” (used to calculate a criminal fine) can be reduced if it had in place an effective compliance and ethics program. To qualify, among other things, those with operational responsibility for the program should have direct reporting obligations to the “governing authority” (i.e., a corporate board) or an appropriate subgroup. (Note, though, that when the Justice Department uses non-prosecution or deferred prosecution agreements in criminal cases, and in other civil settlements, it may not consider effective compliance programs. In fact, the DOJ takes the public position that if a company is a criminal antitrust defendant or potential defendant, its compliance program must have failed and the company deserves no credit for it. Anecdotal evidence suggests that in some cases, though, the DOJ gives private consideration to companies which are essentially victimized by rogue employees and which have compliance programs.).
4. Having a compliance program is a good excuse to rationalize your pricing and distribution system.
5. Some governmental customers require programs as a condition of doing business with them.
On May 29, 2012, the Competition Bureau announced that the Competition Tribunal has ruled in the contested BC waste merger case in favour of the Bureau, ordering the acquirer CCS Corporation to divest the hazardous waste landfill site it acquired in 2011.
In this widely watched case, the Bureau challenged the non-notifiable transaction post-closing taking the position that the transaction would substantially prevent competition in the secure landfill hazardous waste disposal market in North-Eastern British Columbia.
The Bureau argued that the transaction would eliminate a potentially vigorous new entrant in a market characterized by significant barriers and where timely entry was unlikely. The Bureau also argued that there were no alternative substitutes, foreign competition was unlikely and there was an absence of any effective remaining competition.
The decision is noteworthy for being the first contested merger case in Canada in six years (since 2005), a rather rare example of a “prevent” case (a merger may be challenged under the Competition Act where it prevents or lessens competition substantially) and a completed non-notifiable transaction.
Where the Bureau takes the position that a proposed merger is likely to prevent or lessen competition substantially, the Commissioner may seek remedial orders from the Tribunal including an order to block a transaction (in the case of a proposed merger) or an order for the dissolution of assets of shares (in the case of a completed merger).
This case is also an example of the Bureau’s increased willingness to challenge certain transactions post-closing, regardless of size, that may raise competition concerns. (Following 2009 Competition Act amendments, the Bureau may generally challenge mergers for up to one year post-closing, reduced from the former three years.)
In this regard, in announcing the Tribunal’s decision the Commissioner said:
“This case demonstrates that the Bureau will take on cases of all sizes and in all sectors. … Volume of commerce is not the only factor we consider when reviewing mergers — we are willing to take on a case where competition is being denied, regardless of size.”
The Bureau has also said in recent public statements that it would devote more resources to monitor publicly available sources for transactions that may pose competition concerns, making it incumbent on counsel to both review whether a transaction is notifiable and whether a transaction, if below the pre-notification thresholds under the Act, may nevertheless potentially raise competition concerns.
For the Bureau’s news release see:
Competition Bureau Successful in Precedent-Setting Merger Challenge
For the Tribunal’s decision (once available) see:
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For more information about our regulatory law services contact: contact
For more regulatory law updates follow us on Twitter: @CanadaAttorney
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
