Archive for the 'Competition Law' Category
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.
Today was a day for telecom – some of the interesting telecom, competition and regulatory law developments include:
The Acting Chairman of the CRTC delivered remarks to the Canadian Telecom Summit in Toronto on competition in the telecom sector, proposed small telecom ownership rule changes, caps in the upcoming spectrum auctions, Do Not Call List enforcement funding (to allow the CRTC to recover administration and enforcement costs from the telemarketing industry) and anti-spam enforcement: Speech by Leonard Katz to the Canadian Telecom Summit.
The Minister of Industry also delivered a keynote address at the Telecom Summit with brief remarks discussing the spectrum auctions and proposed small telecom ownership rule changes, as well as new funding for SMEs, copyright reform and anti-spam legislation: Speaking Points to the Canadian Telecom Summit, Minister Paradis Challenges Telecom Industry to Innovate, Create and Thrive.
Howard Ullman
(mydistributionlaw.com)
In Smith v. eBay Corp., No. C 10-03825 JSW (N.D. Cal. May 29, 2012) (White, J.), the court refused to dismiss tying claims against eBay and PayPal where the plaintiffs alleged that eBay had tied national on-line auction services to the national on-line payment services provided by PayPal.
Distinguishing the Ninth Circuit’s recent cable TV channel tying case, Brantley v. Universal, Inc. 675 F.3d 1193 (9th Cir. 2012), which I covered here, the court noted that plaintiffs had alleged that defendants’ tying of auction services to on-line payment services had denied alternative payment systems such as Google Checkout access to the largest online marketplace (eBay). Plaintiffs thus alleged, in essence, that they had been precluded from offering Google Checkout as an alternative to PayPal. ”It is reasonable to assume from these allegations that the alleged tying arrangement caused consumers of on-line auction services to forego substitutes for PayPal.”
A few interesting competition and regulatory law developments caught my eye today including:
The Federal Privacy Commissioner announced that she would be tabling the annual PIPEDA Report in Parliament tomorrow: Media Advisory – Commissioner’s annual report on private-sector privacy issues expected to be tabled in Parliament, Privacy Commissioner news release.
Late last week the Federal Attorney General appointed a new Competition Bureau Chairman: Competition Tribunal Appointment Announced.
Gus Van Harten of Osgoode Hall Law School has published an interesting, if critical, note on Canada’s foreign investment rules (thanks to our friend Harpinder Mangat at Carswell who Tweeted this): Not all foreign takeovers are good for Canada.
On May 25, 2012, the Federal Minister of Industry Christian Paradis announced that the Government had issued a Mediation Guideline to introduce formal mediation procedures under the Investment Canada Act (ICA). The Industry Minister also announced that the ICA Regulations would be amended to: (i) gradually increase the threshold for review of investments involving WTO investors to C $1 billion (increased from the current C $330 million) and (ii) introduce (or more accurately reintroduce) a new enterprise value test for the valuation of Canadian companies being acquired, both to implement amendments to the ICA passed on March 12, 2009 (see our earlier posts here and here).
Draft Regulations were first published for public comment in July, 2009 (see: Canada Gazette (July 11, 2009)).
Revised draft Regulations have now been published in the Canada Gazette for public comment (see: Regulations Amending the Investment Canada Regulations).
According to the Government, the proposed changes would “improve Canada’s foreign investment review framework, while maintaining the Government of Canada’s commitment to examine significant foreign investment transactions to determine whether they are likely to be of net benefit to Canada.” The shift to an enterprise test from the current book value of assets test is meant to better reflect the value of businesses as going concerns and importance of intangible assets in service and knowledge-based industries.
In general, the proposed new Regulations would: (i) gradually raise the review threshold for investments involving WTO entities to C $1 billion based on enterprise value over four years (to $600 million for two years, $800 million for the next two years, $1 billion after four years, and then indexed annually based on Canadian GDP), (ii) establish the methodology to calculate the enterprise value of a Canadian business, (iii) make conforming changes to remove references to transportation, financial services and uranium production sectors (lower thresholds for which sectors have been eliminated) and (iv) formalize the process for collecting information relevant to the net benefit and national security foreign investment review processes.
On May 29, 2012, the CRTC issued an updated Do Not Call List (DNCL) Status Report current to April 30, 2012. According to the CRTC, about 10,700,000 telephone and fax numbers are currently registered on the DNCL, it has received a total of 542,991 telemarketing complaints and has 156 active investigations. The CRTC’s Status Report also states that 131 citations, 54 notices of violation and 42 administrative monetary penalties have been issued under the DNCL rules to date.
Under Canada’s DNCL, consumers may register their residential, wireless, fax or VoIP numbers to reduce unwanted telemarketing calls. Registrations are valid for five years and the DNCL rules impose a number of obligations on telemarketers including registering as subscribers of the DNCL, maintaining internal do not call lists, record-keeping and disclosure requirements and restrictions on calling times.
In addition to the DNCL rules, telemarketing in Canada is also governed by the Federal Competition Act, which imposes disclosure and other obligations on telemarketers, and provincial regulations – for example, provincial licensing requirements in British Columbia.
For the CRTC’s Report see: Status Report.
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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
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Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
