Archive for the 'Associations' Category
The Canadian Society of Association Executives (CSAE) will be holding its annual National Conference in Ottawa on November 1-3, 2012.
I am pleased to be co-presenting a seminar on Practical Competition Law and Compliance Case Studies for Trade and Professional Associations with the co-author (Mark Katz) of our new associations book (The Competition Law Guide for Trade Associations in Canada):
“Although most association activities are benign from a competition law perspective, they can raise serious issues in a variety of circumstances that occur on a regular basis. This presentation will review the key provisions of Canada’s Competition Act relevant to trade and professional associations and offer practical guidance on how to reduce risk based on a series of practical and interactive case studies derived from actual Canadian and international examples.
The focus of the case studies will be on real-life association activities that can attract liability if not conducted in an appropriate fashion. Issues to be covered include: (i) when will a purely voluntary or suggested fee tariff/schedule become problematic; (ii) ways associations can engage in joint negotiations or advocacy initiatives on behalf of members without raising competition issues; (iii) how associations can reduce the risk of engaging in information exchanges (e.g., research or benchmarking exercises); (iv) how to structure association membership restrictions and discipline procedures; and (v) what to do to distinguish pro-competitive standard-setting from conduct that can raise competition concerns.
Last week the Advertising Standards Canada released its fourth annual Compliance Report on the Canadian Children’s Food and Beverage Advertising Initiative (see: Advertising Standards Canada releases 2011 Compliance Report on Canadian Children’s Food and Beverage Advertising Initiative).
The Initiative was launched by members of Canada’s food and beverage industry in 2007 in an effort to shift the landscape of advertising directed to children under 12 to the promotion of “better-for-you products”.
Under this Initiative, which includes advertising in all major media (as well as children focused media such as video, computer games and DVDs), participants have committed to either not direct advertising primarily to children under 12 or shift advertising to promote products that are “consistent with the principles of sound nutrition guidance.” The Initiative includes specific nutrition criteria (e.g., foods that reflect the dietary guidelines of Canada’s Food Guide or nutrient content claims of the Canadian Food Inspection Agency’s Guide to Food Labelling and Advertising). Participants in this initiative have also agreed to certain other commitments, such as reducing the use of 3rd party licensed characters used to promote non-Initiative approved products, not advertising in elementary schools or paying for product placements in programs directed at children.
According to the ASC, some participants have stopped child-directed advertising altogether (the 19 food and beverage company participants include Burger King, Campbell’s, Coke, General Mills, Hershey, Kellogg, Kraft, Mars, McDonald’s, Nestle, Pepsi, Post, Unilever and Weston). Others have launched new “better-for-you” advertising initiatives. No product in the ASC’s Initiative is more than 200 calories and every meal is less than 600 calories.
The regulation and self-regulation of food and children’s advertising and labeling is governed in Canada by, among other things, the federal Competition Act, Food and Drugs Act and Consumer Packaging and Labelling Act, as well as the Canadian Food Inspection Agency’s Guide to Food Labelling and Advertising and the ASC’s Broadcast Code for Advertising to Children and Canadian Code of Advertising Standards (which contains specific rules relating to advertising for children).
For a copy of the ASC’s new report see: Canadian Children’s Food & Beverage Advertising Initiative.
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The Competition Tribunal has issued its decision in the TREB abuse of dominance case responding to TREB’s attempt to have a Notice of Constitutional Question heard by the Tribunal.
In refusing to “entertain” TREB’s Notice, which TREB attempted to file with the Tribunal on August 24th (and which the Tribunal refused to accept for filing – see: here), the Tribunal held that the constitutional issues raised by TREB should not be heard on the basis that it contravened the Tribunal’s scheduling order (made on consent), there was no justification for the delay (and that TREB had failed to offer any satisfactory explanation for a breach of the order) and that a disruption of the hearing was likely.
TREB’s Notice challenged the constitutionality of the order sought by the Commissioner of Competition under Canadian competition law, including based on the regulated conduct defence (i.e., that the regulated conduct defence should apply because real estate brokers and agents in Ontario are subject to the provisions of the Real Estate and Business Brokers Act).
The regulated conduct defence or “RCD”, which is now partially codified under section 45(7) of the Competition Act, is one of a number of defences and exceptions that, when met, can apply to provide immunity from the application of the Act. In particular, the RCD can apply where conduct that may otherwise be subject to the Competition Act is either mandated or authorized by validly enacted provincial or federal legislation (though does not provide immunity merely because an industry is regulated generally, or there is authorization for conduct that is not subject to challenge under the Act).
For a copy of the Tribunal’s decision see: Commissioner of Competition v. Toronto Real Estate Board.
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In what can only be described as a growing war against telecom advertising in Canada, the Competition Bureau announced on September 14, 2012 that it began proceedings in Ontario Superior Court against Bell Canada (“Bell”), Rogers Communications (“Rogers”), TELUS Corporation (“TELUS”) and the Canadian Wireless Telecommunications Association (“CWTA”) for alleged misleading advertising in relation to “premium texting services” (see: Competition Bureau Sues Bell, Rogers and Telus for Misleading Consumers: Bureau Seeks Customer Refunds and $31 Million in Penalties).
The Bureau is seeking both the maximum civil penalties available under the Competition Act (the “Act”) against Bell, Rogers and TELUS, as well as full restitution for consumers (amendments to the Act in 2009 both significantly increased the monetary penalties for misleading advertising and introduced a new restitution penalty). The Bureau is seeking a $1 million AMP against the CWTA.
According to the Bureau’s allegations, Bell, Rogers and TELUS (together with the CWTA) facilitated the sale of 3rd party premium-rate digital content – for example, news, advice, alerts, trivia quotations, horoscopes and ringtones – without adequate disclosure of their fees and suggestions were made in advertising for these products that the services were free.
In making the announcement the Bureau said:
“’Our investigation revealed that consumers were under the false impression that certain texts and apps were free,’ said Melanie Aitken, Commissioner of Competition. ‘Unfortunately, in far too many cases, consumers only became aware of unexpected and unauthorized charges on their mobile phone bills.’ The premium-rate digital content in question can cost up to $10 per transaction, and up to $40 for a monthly subscription, rates over and above standard text messaging plans.”
The premium 3rd party content was marketed through free wireless apps and online, and have been the subject of previous consumer studies (see: Paying a Premium: Consumers and Mobile Premium Services, a Public Interest Advocacy Centre report) and critical commentary (see here). The 2011 PIAC report found, among other things, that consumer premium mobile service problems were under-detected and underreported, that the industry often dismisses complaints and no agency tracks or handles related complaints (leading to a recommendation for measures to improve consumer protection in relation to premium mobile services).
This is also the most recent case is the latest in a series of high profile advertising law challenges made by the Bureau against Bell (price claims and disclaimers; see here and here), Nivea (performance claims and the general impression test; see: Nivea), Yellow Page Marketing (misleading business claims and disclaimers; see: here, here and here) and the ongoing Rogers case (performance claims, the general impression test and disclaimers; see: here).
The Bureau’s Claim & General Impression Test
The thrust of the Bureau’s Statement of Claim under Canadian competition law is twofold: first, that the wireless companies made false or misleading representations to the public online and over their wireless networks the general impression of which was that consumers could receive premium text messaging and other services free (when they were in fact charged for the content); and second, that claims were made that consumers were safeguarded from receiving and having to pay unauthorized charges, when in fact the wireless companies collected and facilitated such charges keeping a portion.
In this regard, in Canada the general misleading advertising provisions of the Act can be violated where claims are either literally false or convey a false or misleading general impression.
Interestingly, the Bureau has also imported the recent (and lower) general impression test from the Supreme Court of Canada’s decision in Richard v. Time, alleging that the telecoms’ false or misleading representations were targeted at wireless users, including “credulous, inexperienced, and vulnerable” persons, such as children.
The CWTA’s News Release and Control
In the CWTA’s news release, it indicates that it had in fact contacted the Bureau last year to investigate potential remedies for non-compliant advertising by companies utilizing Common Short Codes (and offer assistance in pursuing potential remedies), the Bureau chose instead to pursue litigation against the CWTA and the defendant telecos, that wireless carriers do not in fact create or control text messaging services (but rather only manage the billing for 3rd party creators and operators) and that the Bureau’s actions could disrupt Canadians’ access to text messaging services.
The control point made by the CWTA is an interesting, if not entirely settled point (i.e., in Canada, the degree to which a party, such as an ISP, must be linked to a false or misleading claim in order to be liable remains subject to debate).
In its Claim, the Bureau emphasizes the wireless companies’ involvement and control of the delivery of text messaging services, through third parties, alleging that the defendants are “far from being passive conduits” for the distribution of text messaging services, but rather provide third party providers with “privileged access” to their networks and the necessary infrastructure to deliver services (while collecting related revenues). According to the Bureau, the entire model for delivery of text messaging services through Short Codes and third parties has been established and is administered by the defendants, relying on their active participation.
Advertising Standards Canada will be holding two upcoming workshops on the basics of Canadian food related advertising regulations in Montreal (September 19th) and Toronto (September 25th). These two hour workshops will address common questions relating to Canadian food advertising related regulations, including how to compare foods, “common names”, how to claim that products are “fresh” / “natural” or “healthy”, nutrient content claims and health claims.
For more information see: The ABC’s of Food Advertising Regulations.
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.
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).
The U.S. Federal Trade Commission has announced that a Puerto Rican pharmacy cooperative has settled price-fixing charges in relation to allegations that pharmacy owners, through a cooperative, had negotiated, entered into and implemented agreements among its member pharmacies to fix the prices on which they contracted with insurers and pharmacy benefit managers.
In making the announcement, the FTC said that the pharmacy cooperative’s actions over the past five years had led to higher prices for Puerto Rico’s health care consumers, and that the cooperative consisted of approximately 300 pharmacy-owner members owning more than 350 pharmacies in Puerto Rico (about one-third of Puerto Rico pharmacies).
Key issues raised by the FTC included collective negotiations by the pharmacy cooperative with more than 10 payers over reimbursement rates, execution of seven “master contracts” on behalf of member pharmacies and threats of collective refusals to supply by cooperative members to achieve higher negotiated rates for the supplying pharmacies.
The proposed consent order in this case includes terms to prohibit the cooperative from entering into or facilitating agreements between or among pharmacies to: (i) negotiate on behalf of any pharmacy with any payer, (ii) refuse to deal or threaten to refuse to deal with any payer, (iii) include any term, condition or requirement upon which any pharmacy deals, or is willing to deal, with any payer, including price terms and (iv) not to deal individually with any payer (or not to deal with any payer) other than through the pharmacy cooperative.
This recent association case caught my eye given that there have been a number of Canadian joint negotiation cartel cases involving associations.
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
