Archive for the 'Competition Law' Category
Conventional thinking has been that the most serious consumer protection enforcement tends to be under federal law (e.g., the Competition Act or Criminal Code). That reasoning changed somewhat last week with an Oakville company being found guilty by a Newmarket Ontario court of violating the Ontario Consumer Protection Act (the “CPA”), fined $250,000, ordered to pay more than $100,000 in restitution to customers with the firm’s director also sentenced to six months in jail. These are the most significant penalties ever imposed against a business under the CPA.
The Oakville heating and cooling company and its director had been charged with 21 violations of the CPA. In making the announcement, Ontario’s Ministry of Consumer Services said:
“It had been alleged that between March and November 2008, Mr. Preston and his company misled consumers in Markham, Stouffville, Toronto and Mississauga by providing contracts and accepting payments for services and products he knew his failing company would be unable to provide. Heating and cooling systems that were supplied malfunctioned shortly after installation and consumers were not given refunds when contracts were cancelled.”
The CPA governs many common types of consumer transactions in Ontario and regulates, among other things, consumer agreements (including future performance, time share, Internet, distance and direct sales agreements), certain types of misleading claims and some specific sectors (including auto repair, credit and leasing).
In the most noteworthy Canadian competition/antitrust law development today, the Competition Bureau announced that a settlement (consent agreement) had been reached in this case, one of two contested mergers in the past few years in Canada (together with the recent CCS hazardous landfill case which was recently decided by the Competition Tribunal and is currently on appeal).
This case, which was to scheduled to be heard in early November before the Competition Tribunal (see: here and here) was noteworthy for being one of only two contested mergers currently underway in Canada and for representing the first challenge, if it had proceeded, of agreements (in this case joint venture agreements between Air Canada and Continental) under Canada’s recently enacted civil agreements provision of the Competition Act (section 90.1 – which, together with section 45, comprises Canada’s new two-track conspiracy/cartel regime).
The Bureau had been challenging three existing Air Canada / Continental “coordination agreements” under section 90.1 of the Competition Act, under which the Bureau can apply to the Competition Tribunal for remedial orders where agreements between competitors prevent or lessen (or are likely to prevent or lessen) competition substantially in one or more relevant markets.
There has not yet been a contested section 90.1 case since this new “civil agreements” provision came into force (which is thought may apply to a range of commercial agreements that, while they may not constitute “hard core” cartel type agreements under section 45 of the Act – i.e., price-fixing, market division/allocation and output restriction agreements – may nevertheless prevent or lessen competition substantially in some cases).
While it is thought that the new section 90.1 may apply, in some instances, to joint venture, franchise, licensing, information exchange and research and development agreements, among others, where competition is substantially impacted, the boundaries of section 90.1 now remain as yet unknown and untested.
“In the 2002 film Minority Report, Steven Spielberg imagined a world in which companies use biometric technology to identify us and serve us targeted ads. Ten years later, that vision is coming closer to reality. Having overcome the high costs and poor accuracy that once stunted its growth, one form of biometric technology – facial recognition – is quickly moving out of the realm of science fiction and into the commercial marketplace.
Today, companies are deploying facial recognition technologies in a wide array of contexts, reflecting a spectrum of increasing technological sophistication. At the simplest level, the technology can be used for facial detection; that is, merely to detect and locate a face in a photo. Current uses of facial detection include refining search engine results to include only those results that contain a face; locating faces in images in order to blur them; ensuring that the frame for a video chat feed actually includes a face; or developing virtual eyeglass fitting systems and virtual makeover tools that allow consumers to upload their photos online and “try on” a pair of glasses or a new hairstyle.”
(U.S. Federal Trade Commission, Report,
Facing Facts: Best Practices for Common Uses of Facial Recognition Technologies)
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For those who have seen the Tom Cruise film Minority Report, you will surely remember the scene where Tom Cruise cruises through Gap and gets targeted ads directed at him. I can’t quite recall if this was an accelerated version of geo targeted advertising or facial recognition (or be sure that I could decode the technology in any event).
In any event, that was the first thing that came to mind when I saw that the U.S. Federal Trade Commission has just published a new staff report yesterday on advertising and privacy issues connected to facial recognition technologies – called: Facing Facts: Best Practices for Common Uses of Facial Recognition Technologies – and sure enough the lead-in to the report describes facial recognition technology, like that depicted in Minority Report, becoming a reality.
In issuing the new report, the FTC said:
“The Federal Trade Commission today released a staff report “Facing Facts: Best Practices for Common Uses of Facial Recognition Technologies” for the increasing number of companies using facial recognition technologies, to help them protect consumers’ privacy as they use the technologies to create innovative new commercial products and services.
Facial recognition technologies have been adopted in a variety of contexts, ranging from online social networks and mobile apps to digital signs, the FTC staff report states. They have a number of potential uses, such as determining an individual’s age range and gender in order to deliver targeted advertising; assessing viewers’ emotions to see if they are engaged in a video game or a movie; or matching faces and identifying anonymous individuals in images.
Facial recognition also has raised a variety of privacy concerns because – for example – it holds the prospect of identifying anonymous individuals in public, and because the data collected may be susceptible to security breaches and hacking.”
The FTC’s new report makes a number of recommendations for companies utilizing facial recognition technologies for advertising including designing services with consumer privacy in mind; developing reasonable security protections for information collected (and policies for determining what information to keep and discard); and evaluating the sensitivity of information when developing facial recognition related products (e.g., digital signs that use facial recognition technology is recommended not to be set up in places where children may be targeted).
The report also makes a number of other recommendations, including in relation to notice, disclosure (i.e., what data will be collected and how it will be used), choice to participate (or opt out) and affirmative consent in some cases.
Last week the CRTC announced that it was denying BCE’s proposed acquisition of Astral, late Friday night the Federal Government announced that it was opposing Petronas’ proposed acquisition of Progress Energy, then late this afternoon, as anticipated, BCE announced it was asking the Federal Cabinet to issue a policy direction under the Broadcasting Act directing the CRTC to follow its policies for change of control broadcasting transactions. In making its announcement BCE said:
“In rejecting the Astral transaction the CRTC rejected its own established policies, creating serious regulatory uncertainty in Canada’s vital broadcasting sector … We’re requesting that Cabinet provide the required guidance to the CRTC to follow its own rules in place, with which the Astral-Bell transaction fully complied.”
Canadian and international firms, it seems, are growing restless with the Federal Government and regulatory agencies determining which deals clear and which are blocked, and related tests (in one instance net benefit to Canada the other a public interest test).
On the other hand, these recent transactions raise important questions about the appropriate factors that should underlie acquisitions of major broadcasting undertakings by market leaders and significant investments in Canada by foreign governments. These include market and consumer effects, choice, security issues and the level of real reciprocal investment. Canadian shareholders and funds want payouts and the free movement of capital and confidence in Canadian capital markets are all highly legitimate concerns, but these decisions have shown (through public opinion and, in the case of the BCE/Astral transaction, through extensive public hearings) that the ability to move capital is not the only concern to Canadians.
In the case of the BCE/Astral deal, one of BCE’s primary arguments has been that it needs scale and size to better compete with global rivals. But what of Canadian consumers facing less competition yet in one of the most concentrated media markets in the world? The CRTC’s Chairman stated during the public hearings that he had spent his summer holiday reading negative comments about the proposed BCE/Astral transaction. Should negative (and allegedly biased and partisan) comments trump CRTC policy?
Of course, more oversight could cure market power concerns (like the OSC’s promised regulation of Canada’s leading securities exchange).
“Is everything sacred in Canada? At first it was a hole in the ground. Then it was the stock exchange and a DIY chain. This week, regulators blocked two more big deals, including a $5.2 billion bid for Progress Energy by Petronas of Malaysia. Taken as a whole, these actions signal the market for corporate control in Canada – especially when it comes to foreign buyers – is effectively closed.”
(Slate)
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“Sources say Ottawa asked Petronas at the eleventh-hour for a delay to rule on its bid to take over Progress until Dec. 7, so it can finalize its new policy. Industry Canada, which is reviewing the transaction, had already delayed its decision once and had promised to produce a ruling by Friday.”
(Financial Post)
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“The lack of transparency is starting to reach new heights. Who releases such an important decision at midnight on a Friday? Someone who has something to hide and no way to explain.”
(NDP leader Thomas Mulcair)
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In a week of surprises that included the CRTC denying BCE’s BCE’s acquisition of Astral, late on Friday night the Minister of Industry announced that he was not satisfied that Petronas’ proposed acquisition of Progress Energy Resources was likely to be of net benefit to Canada:
“I can confirm that I have sent a notice letter to Petronas indicating that I am not satisfied that the proposed investment is likely to be of net benefit to Canada. I came to this decision after a careful and thorough review of the proposed transaction. Under the Investment Canada Act, Petronas now has up to 30 days to make any additional representations and submit any further undertakings, which can be extended with my agreement and that of the investor. Subsequently, I will either confirm this initial decision or approve the acquisition.”
While the Minister reiterated similar earlier statements by the Prime Minister and other Government officials that Canada remained open to investment (saying that the Government remained “committed to maintaining an open climate for investment”), this decision casts those statements further in doubt and, while statistically absolutely true, raises again the question of the applicable rules investors and in particular SOEs must meet.
On Sunday, on CTV’s Question Period, Canada’s Finance Minister Jim Flaherty also said that Canada “welcomes foreign direct investment” but that Petronas type bids must ultimately be “correct”.
The Petronas/Progress deal had received some, but by no means as much, attention as the pending CNOOC/Nexen deal, which has recently been extended until November to allow for a national security review.
According to media reports, Petronas refused the Government’s request for more time to review its proposed bid to acquire Progress, had grown frustrated with negotiations attempting to satisfy the Investment Canada Act’s (ICA) net benefit to Canada test and according to media sources was getting little Government input on required commitments. On October 5th the initial ICA review period had been extended (see: here).
The Minister has an initial 45 days to review proposed investments under the Investment Canada Act, which can be unilaterally extended another 30 days (with further extensions with consent of an investor). Where an investment is opposed, investors may make further submissions in an attempt to clear a transaction with further undertakings.
In a brief news release issued by Progress on Saturday, it said:
“The Board of Directors, management and employees of Progress are disappointed in the announcement. ‘Progress will be working over the next 30 days to determine the nature of the issues and the potential remedies’ said Michael Culbert, President and Chief Executive Officer of Progress. ‘The long-term health of the natural gas industry in Canada and the development of a new LNG export industry are dependent on international investments such as PETRONAS’”.
This decision is rather surprising, although it is always difficult to predict whether transactions will receive ICA clearance based on the opaque political nature of the ICA net benefit criteria and fact-specific nature of every transaction and related undertakings.
State-owned enterprises are subject to an additional layer of review in Canada under Investment Canada’s SOE Guidelines that set out additional factors (relating to the corporate governance and commercial orientation of the SOE) in addition to the general net benefit to Canada factors in section 20 of the ICA. SOEs may also be required, as is being illustrated in this case, to provide more stringent undertakings than private investors – for example, undertakings for the complete duration of a proposed investment.
The American Antitrust Institute (aai) has published a new working paper entitled “Private Recoveries in International Cartel Cases Worldwide: What do the Data Show”?, which includes data on private actions in Canada.
Abstract:
“Despite being around for more than a century in the United States, the role played by ‘treble damages suits’ in cartel enforcement is controversial … Some think of them as exemplars of a hyper litigious society, while others perceive them as essential elements in a rational cartel-enforcement program. In the EU and other jurisdictions outside the United States, the desirability and ideal design of private rights of action are currently matters of intense debates … The purpose of this paper is to examine the size and role played by private damages recoveries in antitrust suits directed at contemporary hard-core international price-fixing cartels. After discussing the data source for this paper, I then describe the amounts and trends in U.S. settlements in private antitrust suits since 1990, the dominance of U.S. cases in the world, the extent to which private suits follow government investigations, and the severity of private recoveries relative to affected sales and to damages caused by the cartels. The last ratios can be used to judge the ex post deterrence power of current monetary cartel penalties. This paper elaborates and extends a book chapter by the author …”
Some of the Canadian data in this recent aai paper include statistics showing cartel damages between 1990 and 2012 of more than $436 million (second to the U.S.), that nearly all private competition/antitrust suits in Canada are follow on suits following U.S. actions (only 10 of the 130 sample Canadian recoveries were in relation to solely non-U.S. actions), the U.S. is the leader in nominal settlement and restitution amounts representing 93% worldwide (with Canada representing 1% and the rest of the world 6%), that Canada is relatively severe in penalties imposing a median amount of fines around 15% (median fines of about 17.5% for global cartels). This study, however, appears to confuse somewhat penalties imposed under the Competition Act (e.g., guilty pleas) with private civil action settlements under the Act. Nevertheless, it includes rather a lot of information and data.
“The CRTC’s well-reasoned decision to deny Bell’s application to acquire Astral addressed concerns of Canadians and consumers about the scope and impact of this transaction.”
(Canada’s largest media union,
the Communications, Energy and Paperworkers Union of Canada)
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“We commend the CRTC for this courageous decision. We believe Canadians should have fair and open access to content”
(Rogers)
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“This is a decision that should not stand. Canadian consumers were told today by the CRTC that they don’t deserve more – more choice, more competition, more Canadian content funding – all of which Bell and Astral committed to with this transaction.”
(George Cope, President and CEO of Bell Canada and BCE Inc.)
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“Evidently, this decision was taken in the best interest of not only the Canadian broadcasting system, but also in the best interest of all Canadian consumers. It demonstrates the CRTC’s desire to ensure healthy competition in the Canadian communications industry and to protect the interests of consumers.”
(Cogeco Cable Inc. CEO)
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On October 18, 2012, in a decision that to be honest surprised me a little (although perhaps it shouldn’t have), the CRTC announced that it was denying BCE Inc’s bid to acquire Astral Media Inc.
The decision is noteworthy for, among other things, its speed (public hearings had only concluded about a month ago), breadth (the decision to block the deal entirely) and a further expression of the CRTC’s apparently reinvigorated focus on the consumer. In this regard, some commentators (see e.g.: here) have noted that the decision is consistent with other recent consumer-oriented initiatives, including upcoming public consultations for a new mandatory wireless code that has started online (with public hearings scheduled to begin in the early new year) and emphasis on consumer access in the CRTC’s recently issued Three Year Plan.
Other CRTC initiatives lately also show its focus on the consumer include the first new interpretation guidelines for the upcoming anti-spam legislation issued last week (which are being criticized by some in the business sector as overly onerous to comply with and impractical in some respects) and stepped up Do Not Call List enforcement in the telemarketing area (e.g., the CRTC’s enforcement action against 85 companies for Do Not Call List violations last spring and exercising more enforcement muscle against offshore deceptive telemarketing – see e.g.: CRTC takes action against telemarketers offering anti-virus software).
In making the announcement earlier today, CRTC Chairman Jean-Pierre Blais said:
“’BCE failed to persuade us that the deal would benefit Canadians,’ said Jean-Pierre Blais, Chairman of the CRTC. ‘It would have placed significant market power in the hands of one of the country’s largest media companies. We could not have ensured a robust Canadian broadcasting system without imposing extensive and intrusive safeguards, which would have been to the detriment of the entire industry.’ The proposed transaction raised substantial concerns related to healthy competition, the concentration of ownership in the television and radio markets, vertical integration and the exercise of market power in an anti-competitive manner. The CRTC was not persuaded that the transaction would have provided significant and unequivocal benefits to the Canadian broadcasting system and to Canadians sufficient to outweigh its concerns.”
Reading some of the recent coverage of the global LIBOR price-fixing investigation made me think about how this case illustrates the sometimes subtle distinction between legitimate and anti-competitive industry “regulation” by associations.
For example, in this particular case, the U.K. Treasury announced today that it had accepted all of the recommendations of an independent review of the LIBOR benchmark, which will include the removal of the British Bankers’ Association (the “BBA”) as the “operational LIBOR administrator” (see also: Libor to be regulated ‘without delay’). LIBOR regulation is, therefore, set to be shifted away from the BBA (a trade association comprised of UK banking and financial services firms) to a new legislatively authorized Financial Conduct Authority.
Specific changes are to include: bringing LIBOR activities within the scope of statutory regulation (Including the submission and administration of LIBOR); creating a new criminal offence for misleading statements in relation to benchmarks, including LIBOR (and amending the language for existing offences); and giving the new Financial Conduct Authority specific power to make rules requiring banks to submit to LIBOR (including a code of conduct).
While the conduct in this specific case, LIBOR and the resulting competitive effects (or potential effects) are all clearly complex, and any wrongdoing not established, the case seemed to me as I said to raise the issue of when an association may assume an industry “regulatory” role and when industry association coordination, rules or barriers may raise competition/antitrust concerns.
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
