Archive for the 'News' Category
The U.K. Office of Fair Trading published an interesting new report yesterday on the potential competition law implications of “price relationship agreements” – for example, where some sellers choose to adopt pricing policies or enter agreements that limit their freedom to price independently, without express coordination with competitors. The OFT’s new report, entitled Can ‘Fair’ Prices Be Unfair? A Review of Price Relationship Agreements, focuses on three types of “price relationship agreements” as follows:
1. Across-sellers agreements – where sellers, for example, promise customers to match (or beat) the price that customers may find for the same or a similar product sold by other sellers.
2. Across-customers agreements – such agreements may include, for example, where a manufacturer of a product is contractually bound to offer a retailer the best price it offers to other retailers (i.e., MFN provisions).
3. Third party agreements – price relationship agreements that are entered into, for example, by manufacturers and retailers, which determine the price paid by customers (e.g., an agreement under which a retailer agrees to set the price at which it resells a manufacturer’s products with reference to the price at which it sells the products of a competing manufacturer).
The OFT’s new report considers, among other things, how such agreements may have a dampening effect on competition or discourage or prevent new entry.
From the OFT (from the Executive Summary):
“In a competitive environment sellers set their price independently of each other, though considering that the prices of their rivals will have an impact on their sales. However, sometimes sellers commit to pricing policies that limit their freedom and that link their prices to other prices charged for the same (or similar competing) products. These types of pricing policies do not determine absolute price level, but set pricing relativities, thus linking different prices to each other. Examples of such pricing policies are price-match guarantees and lowest price promises (which are price commitments ‘across-sellers’) or most favoured nation clauses (which are price commitments ‘across-buyers’). This report explores the possible implications for competition policy of these kind of agreements: it examines the various forms these agreements can take and explores the competition concerns they raise, together with their potential benefits.”
For a copy of the report see: Can ‘Fair’ Prices Be Unfair? A Review of Price Relationship Agreements.
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On September 11, 2012, the Competition Bureau announced that it had laid charges against Progressive Waste Solutions Ltd. and its subsidiary, BFI Canada Inc. for allegations of breaches of a consent agreement following the merger in 2012 of IESI-BFC Ltd. and Waste Services Inc.
In making the announcement, the Bureau said:
“’Today’s announcement sends a strong signal to businesses that breaching a Consent Agreement with the Competition Bureau is an extremely serious matter and will not be tolerated’, said Melanie Aitken, Commissioner of Competition. ‘Consent Agreements are an essential tool to preserve competition and protect consumers from potential anti-competitive harm. Companies who violate the terms of such agreements must be held to account.’”
This announcement is another indication both of the Bureau’s more aggressive enforcement of the Competition Act generally and signals the Bureau’s ongoing appetite to take steps to ensure that settlement agreements under the Act are complied with. In this regard, this case is the third recently announced case in which the Bureau has commenced enforcement steps, including criminal enforcement, relating to alleged breaches of consent agreements (see also: Bureau Seeks Criminal Penalties in Alleged Misleading Advertising and Breach of Consent Agreement Case and Commissioner of Competition Speech Highlights Enhanced Competition Bureau Enforcement).
This case also appears to indicate that the Bureau is making good on its commitments to both monitor the marketplace generally for conduct that potentially violates the Competition Act and for potential violations of consent agreements negotiated with parties in misleading advertising, merger and other cases.
For example in one recent speech, the Commissioner said that the Bureau will “continue to be vigilant in monitoring consent agreements” and would not “hesitate to take further enforcement action as warranted”. Bureau personnel have also indicated in other recent public remarks that they continue to periodically monitor online advertising and marketing for Competition Act compliance and business media for mergers that, while not notifiable, may raise competition concerns.
With the considerable focus on Chinese investment in Canada at the moment, largely arising from the proposed CNOOC acquisition of Nexen (as well as several proposed SOE investments in Canada), Josephine Smart at the University of Calgary has published a new paper on Canada/China investment relations entitled “Dancing With the Dragon: Canadian Investment in China and Chinese Investment in Canada”.
Abstract:
“While Canadian trade and investment with China is today relatively modest, with China well on track to displace the United States as the world’s largest economy, Canada must make it a priority to prepare for a future characterized by dramatically increased trade and investment between our two countries. This paper sheds light on some the issues and measures Canadian governments will have to consider as they look to establish safe and prosperous relationships with China. To begin with, Canadians choosing to invest in China must be prepared for the risk inherent in that country’s peculiar ‘capitalism with socialist characteristics.’ The Chinese state continues to play an interventionist role in many significant sectors in the economy, and the strategy behind China’s overseas investment in countries such as Canada is specifically aimed at furthering China’s own national security goals and geopolitical influence. Canadians wishing to do business in China will also require great cultural competency. The cultural institution known as guanxi — in which gifts to sway influence are considered an acceptable, even desirable practice — persists in China, with even native Chinese unclear on where to draw the line between ‘good’ guanxi and ‘bad’ corruption.
At home, Canadians may soon be forced to confront questions about how much of our own land security and natural resource security we are willing to compromise by permitting Chinese investment to gather up our farmland and key industries. Canadians should decide sooner, not later, how well our own strategic interests are served by permitting unrestricted Chinese investment in our economy. In anticipation of these issues, Canada’s federal and provincial governments should provide increased support for a more comprehensive training and research infrastructure that better prepares Canadians for the growing bilateral trade between our countries. They should also reinvest in the monitoring and regulatory enforcement for food and product safety to ensure that Canadians remain protected from unsafe Chinese imports.”
For a copy of the paper see: Dancing With the Dragon
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Despite an effort by the Toronto Real Estate Board (“TREB”) several weeks back to launch a constitutional challenge, it appears that Canada’s first contested abuse of dominance case to go before the Competition Tribunal in five years (since the Canada Pipe case, proceedings for which went on from 2005 to 2007) is set to go ahead with hearings scheduled next week in Toronto.
In this highly anticipated case, scheduled to be heard from September 10th to October 8th, the Bureau is challenging membership rules enacted by TREB, Canada’s largest real estate board, which it says have substantially lessened competition in the residential real estate services market in the Greater Toronto Area (“GTA”).
In particular, the Bureau is alleging that TREB is dominant in the residential real estate services market in the GTA, has engaged in a practice of anti-competitive acts (that it has enacted and enforced membership rules governing the use of its MLS® data that make it impossible for members to offer certain types of services over the Internet), which has prevented or lessened competition substantially in residential real estate services. In this regard, the Bureau’s burden will be to establish all of the elements for abuse of dominance under section 79 of the Competition Act: dominance (which involves defining the relevant market(s) and showing market power); a practice of anti-competitive acts (some of which are listed in section 78 of the Act, while others have been established by the Tribunal in dominance case law since 1986); and that the conduct has prevented or lessened competition substantially.
The thrust of the dispute largely turns on whether TREB’s control of the MLS® data generated by its MLS® system is anti-competitive (all real estate boards in Canada administer member-driven and fed MLS® systems, which are rich sources of real estate related transaction data, which is largely, but not exclusively, available only to members; in Canada’s MLS systems, there is public and member only data).
Like its earlier abuse of dominance challenge against The Canadian Real Estate Association (“CREA”), which was settled in the fall of 2010, the Bureau’s challenge focuses on TREB’s ability to exclude and discipline non-compliant members by foreclosing access to its MLS® system. In this regard, the Bureau has alleged that TREB has used this ability to restrict and prevent brokers from offering innovative services, such as giving customers access to a “virtual office website” (“VOWs”) which would allow prospective clients to do their own property searches on a broker’s password protected website without the assistance or direct intervention of the broker. The national association for organized real estate in Canada (CREA) established rules and procedures for member real estate agents to operate such virtual office websites some years ago, and many (if not most) real estate boards in Canada permit the operation of VOWS.
In an interesting recent decision by the Ontario Superior Court, the Court refused to allow defendants in a conspiracy action to strike plaintiffs’ claims on the basis of the regulated conduct defence (“RCD”) merely because the industry was regulated.
In Fournier Leasing Co. v. Mercedes-Benz Canada Inc., 2012 CarswellOnt 6068 (Ont. Sup. Ct.), plaintiff auto importers alleged that Mercedes-Benz Canada Inc., Mercedes-Benz USA LLC and BMW Canada Inc. had, among other things, conspired with their dealers in relation to the regulation for the importation of Mercedes and BMW cars into Canada. In particular, the plaintiffs alleged that Mercedes and BMW conspired with their respective dealers to pressure Transport Canada to make certain changes to its admissibility requirements for vehicles imported into Canada, including requirements for Mercedes and BMW to provide admissibility and recall information that could be withheld until importers paid Mercedes and BMW fees for the information and unnecessary vehicle modifications.
According to the Court, these changes to Transport Canada’s admissibility list “gave Mercedes and BMW the ability to deny entry into Canada of vehicles that could properly be imported through [Transport Canada’s program] unless importers paid fees and charges to [Mercedes/BMW] for unnecessary certifications and vehicle modifications … [and] BMW and Mercedes withheld letters of admissibility unless the unnecessary modifications were completed and fees were paid to them by importers.” BMW and Mercedes also charged a standard fee to issue a letter of admissibility.
The thrust of the dispute appears to be allegations by the plaintiff importers that the two auto manufacturers together with their dealers conspired to force importers to pay unnecessary costs imposed as a result to regulatory changes introduced by Transport Canada, based on an apparent concern of lost revenues arising from cheaper Mercedes and BMW cars from the U.S. – which were in some instances as much as 35% lower in price.
Some of the arguments being made by the plaintiff importers include allegations that Mercedes and BMW and their dealers conspired to fix prices for modifications and certifications for importation of Mercedes, BMW and Mini vehicles and allocated the market for modifications for the importation of certain vehicles. The plaintiffs in this case also allege theories of harm based on tort and equitable grounds, including civil conspiracy, interference with economic relations, unjust enrichment, waiver of tort and breaches of consumer protection legislation.
In bringing a motion to strike the plaintiffs’ claims for a failure to disclose a cause of action, the defendants argued, among other things, that the conduct in question was immune from Competition Act liability based on the application of the RCD. The RCD, which has now been partially codified in subsection 45(7) of the Competition Act as a result of 2009 amendments to the Act, is the Canadian equivalent of the U.S. state action immunity doctrine. When met, it offers a form of immunity from enforcement under the Competition Act for legislatively authorized or mandated conduct. As such, the RCD can operate as a defence (though it has also sometimes been characterized as an exception) to some types of activities that would otherwise be subject to the Competition Act.
Venable LLP (Jeffrey S. Tenenbaum and Andrew E. Bigart) have published an interesting new trade association and antitrust law related article entitled “Knockin’ on Your Association’s Door: What You Need to Know About Membership Restrictions and the Antirust Laws”, which discusses the application of antitrust laws to some types of association activities including membership restrictions, membership qualifications, codes of ethics, access restrictions to association services and, interestingly, restrictions on access to association trade shows.
Abstract:
“Groucho Marx famously said, “I don’t care to belong to any club that will have me as a member.” Associations frequently take this sentiment to heart by establishing membership restrictions and other limits on access to association services or events. These restrictions come in many shapes and sizes – limiting membership to a specific trade, profession, or market function; imposing geographic limitations; or requiring professional certification, state or federal licensure, or adherence to a code of ethics, to name just a few.
These restrictions often serve a legitimate purpose by helping the association function effectively and focusing its efforts on benefiting an industry or profession with common interests. At the same time, however, these restrictions potentially limit competition by excluding others from participating in association activities. Although courts usually are reluctant to interfere with internal association rules and decisions, an association’s establishment of membership restrictions or qualifications may raise legal concern under the antitrust laws.
This article provides a brief overview of the antitrust laws as they apply to membership restrictions, along with some suggested practices for minimizing potential liability.”
For a copy of this rather good article see:
Association Membership Restrictions in Canada
Association membership restrictions can raise competition law concerns in Canada as well. While in many instances legitimate, objective and non-discriminatory membership criteria are unlikely to raise concerns, issues can arise if associations attempt to exploit their membership criteria to restrict competition.
Membership criteria can be used to limit or restrict competition in several ways, such as if they are designed (or applied) to artificially restrict entry into an industry or profession, refuse a competitor access to competitively significant resources owned or operated by the association (sometimes referred to as “essential facilities”) or to limit or restrict members’ business structures or scope of practice (which can sometimes arise from standard-setting efforts by associations).
When I’m out chatting to clients and industry groups about competition and advertising law, some of the most frequently asked questions after gasoline pricing relate to airline pricing – and in particular, why the “price” for flights never seems to be the actual price.
Well, as many folks that work in the competition, advertising or marketing law areas know, there has been increasing pressure recently by enforcement agencies (and a number of regulatory efforts afoot in several industries) to ensure that the advertised price is the price, the price and nothing but the price. Period.
One such initiative is the long anticipated, but slightly slow to come into effect, reforms to airline pricing.
In this regard, late last week, the Canadian Transportation Agency announced that Canadians have two weeks (a bit less since I am writing this over the long weekend) left to comment on proposed airline price advertising regulations.
In making the announcement, the CTA said:
“There are only two weeks remaining to review and comment on the proposed regulatory amendments to the Air Transportation Regulations (ATR) pertaining to the advertisement of the price of air services.
Input received by nearly 3,600 stakeholders and Canadians who participated in the online consultation held in February informed the development of the Agency’s proposed ATR amendments. The proposed amendments were pre-published in Part I of the Canada Gazette on July 3, 2012 to give various interested groups and individuals, as well as Canadians in general, a final opportunity to review and comment. Comments received from interested parties by September 13, 2012 may result in changes to the proposed regulatory amendments. It is anticipated that the final amendments will be published in the Canada Gazette, Part II this winter.
In advance of its upcoming “Canada in the Pacific Century” conference to be held in Ottawa this fall, the Canadian Council of Chief Executives (CCCE) has published another new paper discussing Canada’s role in a world where the role of the U.S. as a major trading partner is increasingly in doubt and the importance to Canadian businesses to understand Asia seems to grow exponentially with each passing day.
With two current resource plays by Asian state owned enterprises, a recent trade mission having just been completed by Canada’s Trade Minister to South-East Asia and a major China trade mission by Canada’s PM earlier this year, Canada/Asia relations are very much in the spotlight.
Introduction:
“For 250 years, Canada’s strong economic links with its neighbour to the south have been a cornerstone of its growth and prosperity. While the United States will continue to be a major economic partner and critical ally for Canada, it is vital that Canada build equally strong links with Asia.
During the period from 2010 to 2025, Asia is projected to generate 33 percent of global economic growth. China, the world’s second-largest economy, is urbanizing 100 times faster than the United Kingdom did in the 19th century, and is expected to rival the United States in economic terms by 2020-2030. India, too, is urbanizing rapidly. Seven new “smart” cities are planned for the Delhi-Mumbai corridor and more than 215 million people are expected to migrate from villages to cities by 2015.
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
