Archive for the 'Conspiracy' Category
The Competition Bureau has updated its organizational chart with John Pecman (formerly head of the Criminal Matters Branch) as Acting Commissioner of Competition. From the Bureau:
“John Pecman is Acting Commissioner of Competition.
The Commissioner is responsible for the administration and enforcement of the Competition Act and three labelling statutes, the Consumer Packaging and Labelling Act, the Precious Metals Marking Act and the Textile Labelling Act.
Under the Competition Act, the Commissioner can launch inquiries, challenge civil and merger matters before the Competition Tribunal, make recommendations on criminal matters to the Director of Public Prosecutions of Canada (DPP), and intervene as a competition advocate before federal and provincial bodies.
As head of the Canadian Competition Bureau, the Commissioner leads the Bureau’s participation in international fora such as the Organization for Economic Cooperation and Development (OECD) and the International Competition Network (ICN), to develop and promote coordinated competition laws and policies in an increasingly globalized marketplace.
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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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).
Earlier today, the Australian ACCC published a rather fine new video entitled “The Marker” to raise criminal conspiracy (cartel) awareness. At 16 minutes, a must for competition/antitrust law geeks. From the ACCC:
“Australian Competition and Consumer Commission chairman Rod Sims today announced the next part of an integrated strategy to prevent cartel involvement – release of The Marker, a short film that shows the devastating effects involvement in a cartel can have on individuals and businesses.”
Here is a link to the ACCC’s new video: Australian ACCC – The Marker video.
Interestingly, according to the Australian competition authority, the ACCC, recent Australian research into cartel activity found that more than half of business people do not know that cartel conduct (i.e., price-fixing, market division/allocation, output restriction agreements and bid-rigging) is a criminal offence and almost 1 in 10 business people said they would be likely to engage in cartel conduct if the opportunity presented itself.
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On July 30, 2012, the Competition Bureau announced that the Corporate Research Group Ltd. (CRG) has pleaded guilty to a criminal charge of bid-rigging for federal government contracts in relation to real estate advisory services and was fined $125,000. In making the announcement the Bureau reflected its continuing focus on criminal competition law matters and reliance on its Immunity and Leniency Programs:
“The Bureau’s investigation benefited from cooperation under the Bureau’s Immunity and Leniency Programs, which create incentives for parties to address their criminal liability by cooperating with the Bureau in its ongoing investigation and prosecution of other alleged cartel participants.
Cracking down on cartels, including bid-rigging offences, is a top priority for the Bureau. Under the Competition Act, it is a criminal offence for two or more bidders, in response to a call or request for bids or tenders, to agree among themselves on the bids submitted, to agree that one party will refrain from bidding or to agree to withdraw a submitted bid, without informing the person calling for the bids of this agreement.”
Under section 45 of the Competition Act (the criminal conspiracy offences of the 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).
I am pleased to be delivering the Competition Law and REALTORS course for the Real Estate Board of Greater Vancouver on August 29, 2012. This course has been designed by the Alliance for Canadian Real Estate Education (ACRE) in conjunction with The Canadian Real Estate Association (CREA).
From ACRE:
“Competition Law and REALTORS®: What You Say and Do Matters was designed by ACRE with the assistance of CREA to help Canadian REALTORS® understand and comply with Canadian competition law. While Canadian competition law applies to all real estate professionals, this course was designed specifically for REALTORS®. This course provides an overview in plain language of Canadian competition law and practical compliance guidelines to assist REALTORS® in complying with Canadian competition law and a number of illustrative case studies.”
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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)
