Archive for the 'Competition Bureau' Category
On June 28th, the Competition Bureau announced that Bell Canada has agreed to stop making allegedly misleading claims relating to the prices for its services and to pay an administrative monetary penalty of $10 million.
In making the announcement, the Bureau said:
“The Bureau determined that, since December 2007, Bell has charged higher prices than advertised for many of its services, including home phone, Internet, satellite TV and wireless. The advertised prices were not in fact available, as additional mandatory fees, such as those related to TouchTone, modem rental and digital television services, were hidden from consumers in fine-print disclaimers.
…
As an example, Bell’s Web site had been advertising a bundle for home phone, Internet and television services starting as low as $69.90 per month. However, it was impossible for customers to buy the bundle for the advertised price. In fact, the lowest possible price, including the mandatory fees, was $80.27—approximately 15% higher than advertised. Customers purchasing any of the services individually were also faced with the same misleading information, as additional fees were excluded from those advertised prices as well.”
In Canada, the federal Competition Act contains both civil and criminal provisions dealing with false or misleading representations and also governs a variety of specific forms of marketing conduct including “ordinary selling price” claims, selling above an advertised price, deceptive telemarketing, promotional contests and performance claims.
Generally speaking, the “general” civil misleading advertising provisions of the Act prohibit representations to the public, for the purpose of promoting a product or business interest, that are false or misleading in a material respect. The criminal provisions, which are substantially similar, prohibit false or misleading representations that are made intentionally (i.e., knowingly or recklessly).
The maximum penalties under the civil misleading advertising provisions of the Act were also dramatically increased in 2009, as a result of sweeping amendments to the Competition Act (up to $10 million for corporations). Parties can, however, and in a number of past cases have agreed to, settle misleading advertising cases for amounts exceeding the statutory maximum fines provided under the Act – for example, to avoid potential criminal liability (as misleading advertising can be reviewed by the Bureau as either a civil matter or criminal offence).
In this case, the Bureau challenged the accuracy of price claims made by Bell, as well as hidden fees and fine-print disclaimers. According to the Bureau, its concerns were based primarily on allegedly literally false claims (i.e., services that were not available at all at the advertised prices, including for Bell’s home phone, Internet, satellite TV and wireless services).
Advertising and marketing claims can violate the misleading advertising provisions of the Act where they are either literally false or merely misleading (e.g., true claims can also violate the Act in some cases where they fail to disclose essential information).
Not surprisingly, courts and the Bureau have, as in this case, for the most part raised concerns with either literally false or misleading claims that relate to price, performance or other essential product aspects, which are the most likely to be found to be “material” for the purposes of the misleading advertising provisions of the Act (to constitute misleading advertising under the Act a claim must be shown to be not only false or misleading but also “material” – i.e., likely to cause an average consumer to purchase the product).
This most recent case involving Bell follows other recent enforcement efforts by the Bureau against high profile companies including its $10 million misleading advertising claim against Rogers (see: Competition Bureau Takes Action Against Rogers Over Misleading Advertising).
Misleading advertising and other deceptive marketing also continues to be an enforcement priority for the Bureau. For example, in a recent speech, the Commissioner of Competition Melanie Aitken said:
“We are also on the watch for misleading and fraudulent representations in areas that hit close to home for Canadians. Our goal is to address and redress such unlawful conduct and, at the same time, to build confidence in the marketplace and demonstrate the relevance of the Bureau’s work to Canadians in their everyday lives.”
See: Remarks by Melanie Aitken, Commissioner of Competition to the CBA Spring Conference: Focus on Civil.
For the complete Bureau news release in the Bell case see:
For a copy of the consent agreement filed with the Competition Tribunal see:
___________________
For more information about our regulatory law services contact us: contact
For more regulatory law updates follow us on Twitter: @CanadaAttorney
The Competition Bureau announced that would seek to block a proposed joint venture between Air Canada and United Continental which, according to the Bureau, would “monopolize ten important Canada/United States routes, and substantially reduce competition on nine additional routes.”
In making the announcement, the Bureau said:
“The proposed joint venture is effectively a merger between Air Canada and United Continental on all of their Canadian and US operations. It would allow the parties to jointly set prices, capacity and schedules. If allowed to proceed, it will result in:
a monopoly on ten transborder routes;
substantially reduced competition on an additional nine transborder routes; and
significantly higher prices.
In addition to challenging the joint venture, the Commissioner is challenging three existing “coordination agreements” between Air Canada and United Continental. These agreements allow Air Canada and United Continental to coordinate key aspects of competition including, but not limited to, joint pricing and scheduling, as well as revenue sharing. Through these existing agreements, the companies currently have the power to charge passengers inflated fares. Moreover, if these anti-competitive provisions are further implemented, with or without the joint venture, Canadians will pay even more for less choice and higher fares.”
According to the Bureau, it became aware of the proposed Air Canada/United joint venture after the parties issued a press release.
Joint ventures can be reviewed under at least four provisions of the Competition Act: as a criminal conspiracy, under the civil agreements provision, as a merger or under the abuse of dominance provisions, which also contemplates joint dominance.
In this case, the Bureau is challenging the proposed JV under the merger provisions of the Act, which allow the federal Competition Tribunal to issue orders including blocking proposed mergers or ordering the dissolution of assets or shares in the case of a completed merger.
The Bureau is also challenging three existing “coordination agreements” between the parties under the newly enacted civil agreements provision – section 90.1 – which is the Bureau’s first challenge to an allegedly anti-competitive agreement under this provision, which came into force in 2010 as part of sweeping amendments to the Competition Act.
Under the merger provisions of the Act, the Tribunal can issue orders, including blocking proposed mergers (or ordering the dissolution of assets or shares in the case of a completed merger) where a merger is found to prevent or lessen competition substantially. Under the new civil agreements provisions – section 90.1 – the Tribunal has the power to make “remedial orders” (i.e., for conduct to stop) where an agreement between actual or potential competitors prevents or lessens competition substantially.
It is, however, relatively unusual for a proposed agreement to be independently challenged by the Bureau outside of the context of parties seeking merger clearance or an advisory opinion for proposed business conduct. Possibly the parties concluded that the proposed JV was not notifiable under the merger provisions of the Act or there was a failure to adequately review whether the proposed JV may have required merger notification.
Another interesting aspect of this case is that the Bureau alleges that the proposed joint venture was intended to circumvent foreign ownership restrictions governing Canadian airlines, by allowing the parties to in essence merge though the joint venture.
With respect to market share and concentration issues, the Bureau’s concerns appear to primarily be based on increased “post-merger” market shares on specific city pair routes of between 34% and 100% (market shares typically being calculated in airline markets based on city pair routes).
Also interesting is the fact that while the Commissioner has the power to apply to the Tribunal for remedial orders, contested merger proceedings are relatively rare in Canada with the majority of issues typically resolved by way of negotiated settlement (i.e., consent agreements for the divestiture of assets and to a lesser extent the adoption of behavioural remedies).
For example, the Bureau’s recent challenge of CCS Corporation’s proposed acquisition of Complete Environmental, owner of the proposed Babkirk Landfill in Northern British Columbia, was the Bureau’s first merger challenge since 2005.
For the complete news release see:
Competition Bureau Seeks to Block Joint Venture between Air Canada and United Continental
For the Bureau’s Backgrounder see:
For the Bureau’s Competition Tribunal Application see:
__________________
For more information about our regulatory law services contact us: contact
For more regulatory law updates follow us on Twitter: @CanadaAttorney
On June 20, 2011, the U.K. Office of Fair Trading, the U.K.’s competition regulator, announced that it was referring the proposed acquisition of Chi-X Europe Limited by BATS Trading Limited to the Competition Commission for further investigation.
In making the announcement, the OFT said:
“Both companies operate Multilateral Trading Facilities (MTFs) which enable market participants (investment banks, brokers and dealers) to trade pan-European equities through a single platform as an alternative to trading on national exchanges such as the London Stock Exchange (LSE). MTFs are relatively new, having mostly formed following the introduction of the European Markets in Financial Instruments Directive in 2007. Billions of pounds worth of equities are traded on these platforms daily.
After the LSE, the merger parties are the two largest MTFs for the trading of UK-listed equities. The merger reduces the number of significant suppliers of trading services for UK-listed equities from three to two. In addition the parties have very similar service offerings. Although the evidence is mixed, the OFT believes that there is a realistic prospect that, absent the merger, the parties would going forward have competed more strongly against each other, as well as competing against the LSE.
Ali Nikpay, OFT Senior Director and decision maker in this case said:
‘This case is not one in which we have encountered widespread customer complaints. However, we cannot rule out the prospect that such a structural shift in the marketplace would lead to a substantial lessening of competition. We have therefore referred the merger to the Competition Commission for a more detailed investigation so it can determine whether a substantial lessening of competition is probable.’”
Based on the OFT’s announcement, U.K. competition law regulators appear to have concerns that the proposed BATS/Chi-X transaction will result in the combination of the two largest alternative trading platforms for equities in the U.K. and as well based on an apparent concern arising from the product overlap (trading services) between the two exchanges. It is not yet clear, however, whether the U.K. regulator perceives post-merger concentration issues for multiple products (e.g., clearing and auction services, in addition to equity trading services) or whether there is a risk that the transaction may be blocked altogether (as opposed to the imposition of a behavioural or structural remedy).
In this regard, this most recent stock exchange merger case follows the recently abandoned joint bid by the NASDAQ OMX Group Inc. and IntercontinentalExchange Inc. last month to acquire the NYSE Euronext, following a decision by the U.S. Department of Justice to block the transaction altogether (see: NASDAQ OMX and IntercontinentalExchange Abandon Acquisition of NYSE Euronext).
The proposed BATS/Chi-X transaction also follows the recent plays for the TMX Group Inc. by the London Stock Exchange Group plc (see Competition Bureau Issues No Action Letter in TMX/LSE Deal) and the more recent all-Canadian hostile bid launched by the Maple financial consortium (see: Maple Group Launches Cdn. $3.7 Billion Hostile Bid for TMX Group Inc.).
While the Competition Bureau has issued a no action letter clearing the proposed TMX/LSE merger, it is not yet clear what competition issues might ultimately still prove to be an issue for the Maple bid for the TMX (which, like the proposed BATS/Chi-X deal, would involve the combination of the largest alternative stock exchange to the TSX).
For the OFT’s full news release see:
OFT Refers Equity Trading Merger to the Competition Commission
__________________
For more information about our regulatory law services contact us: contact
For more regulatory law updates follow us on Twitter: @CanadaAttorney
On June 13, 2011, the Maple Group Acquisition Corp., a consortium of 13 Canadian financial institutions, launched a Cdn. $3.7 billion hostile bid to acquire 70% of the TMX Group Inc. for $48 per share.
(Maple is composed of 13 banks, pension funds and institutional investors: Scotia Capital Inc., TD Securities, National Bank of Canada, Canadian Imperial Bank of Commerce, Alberta Investment Management Co., Caisse de depot et placement du Quebec, Canada Pension Plan Investment Board, Ontario Teachers’ Pension Plan Board, Fonds de Solidarite FTQ, Manulife Financial Corp., Dejardins Financial Group, GMP Capital Inc. and Dundee Capital Markets.)
According to the Globe and Mail and other media reports, the Maple bid is a cash and share offer with Maple valuing its offer for TMX at Cdn. $3.7 billion ($2.5 billion in cash with the balance in Maple shares or Cdn. $33 cash per share plus Maple shares).
The launch of the rival Maple bid follows the earlier proposed friendly TMX/London Stock Exchange Group (LSE) merger and also follows in the wake of a recently abandoned joint bid by the NASDAQ OMX Group Inc. and IntercontinentalExchange Inc. last month to acquire the NYSE Euronext, following a decision by the U.S. Department of Justice to block the transaction (see: NASDAQ OMX and IntercontinentalExchange Abandon Acquisition of NYSE Euronext).
In the failed NASDAQ/NYSE transaction, it appears from public statements by U.S. regulators that their concerns included overlap in several relevant markets, including stock listing services, stock auction services (used at the open and close of trading and periodically during market imbalances) and trade reporting facilities (used for the reporting of stock trades occurring outside of a stock exchange).
It is not yet clear whether the Maple hostile bid for the TMX will raise substantive competition law issues for the Bureau of the kind that resulted in the failed NASDAQ/NYSE transaction, or for the parties to the Maple/TMX transaction to avoid the imposition of remedies if successful.
Potential competition concerns include Alpha/TMX overlap in trading or market information services (five Maple investors have existing holdings in Alpha), Alpha having been described as “the TMX’s biggest domestic competitor” and “Canada’s main alternative trading platform” in the stock trading market. The TMX itself described Alpha in its 2010 Annual Report as having posed the “largest competitive impact” on its trading business.
The integration of CDS, which handles the clearing of share trades and is Canada’s major stock clearing facility, with the TMX may also raise potential issues, based either on overlap with existing TMX clearing services or possible impacts on non-Maple investor customers. In this regard, Maple’s bank investors and the TMX hold interests in CDS.
In this regard, existing remaining competition is a key substantive factor for the Competition Bureau in merger review under the Competition Act (see: Competition Bureau, Merger Enforcement Guidelines).
It also remains to be seen whether the proposed entry of Alpha in the listing services market will be a concern for the Bureau – i.e., whether the Bureau may see the Alpha/TMX merger as essentially removing a potential new entrant.
Having said that, unlike some other major jurisdictions including the U.S. and EU, fully contested merger proceedings are generally speaking rare in Canada with most substantive issues being resolved through negotiated settlements with the Bureau – i.e., through the imposition of structural or behavioural remedies to alleviate competition law concerns (see: Competition Bureau, Information Bulletin on Merger Remedies in Canada).
Potential remedies in this case, in the event the Maple bid is successful, may include the divestiture of the Maple investors’ holdings in Alpha. If significant competition concerns are raised, “behavioural” remedies may also be possible – for example, steps to alter the Maple investors’ representation on the Alpha board or control provisions in Alpha shareholder agreements.
According to some media reports, Maple has in fact indicated that it may be willing to divest its interests in Alpha and CDS to obtain regulatory approval for the transaction.
With respect to the timing for the proposed transaction, the parties will be subject to an initial 30 day waiting period for a review of the transaction during which the Bureau may request additional information extending its review to a second phase review (or a timing agreement negotiated between the parties extending the time for the Bureau’s review, without the issuance of an additional information request).
__________________
For more information about our regulatory law services contact us: contact
For more regulatory law updates follow us on Twitter: @CanadaAttorney
On June 10, 2011, the Competition Bureau announced that two more individuals have pleaded guilty in the ongoing Quebec gasoline price-fixing case to fix the price of gasoline at the pump in Thetford Mines, Quebec.
In making the announcement, the Bureau said:
“The two individuals, Claude Bédard and Stéphane Grant, former Irving employees, were sentenced to personally pay fines of $15,000 and $10,000, respectively. Messrs. Bédard and Grant were both area sales managers for ‘Les Pétroles Irving Inc.’ responsible for the Thetford Mines market.”
In this case, which was one of the largest criminal cases in the Bureau’s history, charges were laid against 38 individuals and 14 companies accused of fixing the price of gasoline at the pumps at several locations in Quebec. According to the Bureau, to date 6 companies and 13 individuals have pleaded guilty in the case.
The case is also somewhat noteworthy in that six individuals have been sentenced to total imprisonment of 54 months (served in the community). While the penalties for contravening the criminal conspiracy provisions of the Competition Act include imprisonment for up to fourteen years, prison sentences for individuals have been, at least to date, relatively rare in Canada with liability in many cases being negotiated down to corporate liability and fines.
For the Bureau’s news release see:
Two Individuals Plead Guilty in Quebec Gasoline Price-Fixing Cartel
__________________
For more information about our regulatory law services contact us: contact
For more regulatory law updates follow us on Twitter: @CanadaAttorney
The U.S. Federal Trade Commission has announced that it has filed a $450 million internet fraud civil suit against an Alberta online operator.
According to the FTC, Jesse Willms, an online operator with ten marketing companies, has:
“… raked in more than $450 million from consumers in the United States, Canada, the United Kingdom, Australia, and New Zealand by luring them into ‘free’ or ‘risk-free’ offers, and then charging them for products and services they did not want or agree to purchase. … The defendants used the lure of a ‘free’ offer to open an illegal pipeline to consumers’ credit card and bank accounts.” See: FTC Charges Online Marketers with Scamming Consumers out of Hundreds of Millions of Dollars with “Free” Trial Offers.
The FTC’s complaint alleges, among other things, that Willms and the companies he controls:
– Used deceptive tactics in offering “free trials” for various online products, including acai berry weight-loss pills, teeth whiteners and health supplements.
– Obtained consumers’ credit or debit card account numbers, by enticing them with “bogus ‘free’ or ‘risk-free’ trial offers that supposedly required only small shipping and handling fees, and also promised phony ‘bonus’ offers just for signing up” (and were charged for trial and bonus products plus recurring monthly fees).
– Made false claims about the total cost of products, recurring charges and the availability of refunds.
– Made false weight loss and cancer cure claims in relation to products.
– Provided merchant banks with false or misleading information to acquire and maintain credit and debit card processing services from the banks in light of “mounting chargeback rates and consumer complaints.”
– Concealed important terms and conditions relating to product sales.
According to the FTC, it worked closely with Canadian law enforcement officials, including the federal Competition Bureau, the Royal Canadian Mounted Police, the Alberta Partnership Against Cross Border Fraud and the Edmonton Better Business Bureau.
In Canada, the federal Competition Act contains both civil and criminal provisions dealing with false or misleading representations and also governs a variety of specific forms of marketing conduct including “ordinary selling price” claims, selling above an advertised price, deceptive telemarketing, promotional contests and performance claims.
Generally speaking, the civil misleading advertising provisions of the Act prohibit representations to the public, for the purpose of promoting a product or business interest, that are false or misleading in a material respect. The criminal provisions, which are substantially similar, prohibit false or misleading representations that are made intentionally (i.e., knowingly or recklessly).
Some of the types of claims that have been of concern for Canadian courts and the Competition Bureau in the past include literally false claims, omitting key information relating to the price or terms of sale of products and false claims regarding the performance of products (product performance claims must be supported by “adequate and proper” tests before any claim is made).
As with the FTC claims, the Competition Bureau has also pursued companies for inaccurate use of the term “free” in connection with marketing claims (see: False or Misleading Representations and Deceptive Marketing Practices and Misleading Advertising Guidelines) and has also issued specific guidelines setting out its enforcement position for online marketing and advertising (see: Application of the Competition Act to Representations on the Internet).
As a result of amendments to the Act in 2009, it is also not necessary to show that a misleading claim was made to Canadian consumers or was made in a publicly accessible place. These changes were recently made to address perceived gaps in the Act and to specifically address misleading claims made in Canada targeting foreign consumers (as is alleged in this FTC case, albeit from a U.S. enforcement perspective) and claims originating in places without direct consumer contact (e.g., in the context of online marketing operations).
For copies of the FTC’s complaint and motion for injunction see:
Complaint for Permanent Injunction and Other Equitable Relief
Motion for Preliminary Injunction and Memorandum of Points and Authorities in Support
For Jessie Willms’ news release in reply to the FTC’s allegations see:
_________________
For more information about our regulatory law services contact us: contact
For more regulatory law updates follow us on Twitter: @CanadaAttorney
Somewhat eclipsed by the recent Competition Bureau case commenced against Canada’s largest real estate board, the Toronto Real Estate Board, are signs that the Bureau may also intervene to stem complaints that provincial boards and associations are thwarting flat-fee listing agents from posting Canada-wide listings.
The Globe and Mail has reported that:
“A fresh fight is brewing in the home sales industry, as the associations that represent real estate agents try to enforce restrictions on new, lower-cost competitors in an effort to prevent them from doing business across provincial boundaries.
The competitors offer low-cost, flat-fee listings on Realtor.ca, and were under the impression they would be able to accept clients from across the country after the real estate industry settled a case with the Competition Bureau last year that allowed them entry to the market.”
According to the Globe, some Canadian real estate firms are saying that they are being forced out of business by local real estate boards interpreting provincial legislation “in a way that prevents them from competing with commission-based agents” and that they have asked the Competition Bureau to intervene in this fresh fight.
The key issue is whether, as a result of the recent CREA settlement with the Bureau, real estate agents operating and licensed in one province should be permitted to post listings from other provinces on Realtor.ca (and the extent to which the voluntary trade associations to which they belong – i.e., the various local real estate boards and associations – should have the power to restrict such Canada-wide listings).
Some boards and provincial regulators have taken the position that the agents posting Canada-wide listings are trading in real estate and, as such, must be licensed in each province from which they are posting listings (i.e., an agent licensed in Ontario should not, for example, be permitted to post listings on Realtor.ca from Manitoba).
While the issue may seem straightforward enough when it comes to dealing with the local boards and associations, which do not have any legislative power to regulate broker and agent activities (local real estate boards and associations are non-statutory voluntary trade associations), it may prove to be a very different matter when the agents face the provincial regulators.
This is because the “regulated conduct defence” (“RCD”) may operate to preclude Bureau enforcement action where a legislatively authorized provincial regulator limits or restricts the ability of agents licensed in one province to post listings on Realtor.ca from another province in which they are not licensed to operate. In particular, the RCD can operate to exempt conduct that would otherwise be subject to the Competition Act where it is either mandated or authorized by valid provincial or federal legislation.
As such, while the Bureau may decide to take steps against local boards for restricting members from offering Canada-wide listings on Realtor.ca, or take the position that the terms of the recent settlement between CREA and the Commissioner are not being complied with, it may have no power to proceed against provincial regulators that discipline or sanction agents for not complying with provincial rules regulating real estate agents (e.g., for unlicensed trading in real estate).
For more see:
Competition Bureau Asked to Settle New Fight Over MLS Listings
Competition Bureau “Regulated” Conduct Bulletin
___________________
For more information about our regulatory law services contact us: contact
For more regulatory law updates follow us on Twitter: @CanadaAttorney
The Wall Street Journal has reported that the Competition Bureau has issued a no action letter in the proposed TMX Group Inc. / London Stock Exchange Group plc transaction.
According to the parties, the issuance of the no action letter satisfies the condition of their February 9th, 2011 merger agreement. For the TMX Group news release see:
TMX Group – London Stock Exchange Group Proposed Merger Receives Clearance from Competition Bureau
Under the Competition Act, merging parties may complete a proposed transaction that is notifiable when: an ARC is received (the strongest form of pre-merger clearance under the Act, typically issued in non-complex transactions where there are few or no issues); a “no action letter” is received, stating that the Commissioner does not at that time intend to seek a remedial order from the Competition Tribunal; or the applicable statutory waiting period has expired.
As a result of recent amendments, however, the Bureau may still challenge a transaction where a no action letter is issued (or the applicable statutory waiting period has expired, allowing the merging parties to complete) for up to one year post-closing.
__________________
For more information about our regulatory law services contact us: 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)
