SECTION 76 OF THE COMPETITION ACT
(PRICE MAINTENANCE)
Under section 76 of Canada’s federal Competition Act (Price Maintenance) the Competition Tribunal can make remedial orders where, among other things, a producer or supplier, by “agreement, threat, promise or any like means” influences upward or discourages the reduction of the price at which a customer, or any other person to whom a product comes for resale, supplies, offers to supply or advertises a product in Canada (section 76(1)(a)(i)).
Section 76 of the Competition Act can, therefore, apply to not only minimum resale price and MSRP policies, but also to minimum advertised price (MAP) policies (e.g., where a producer or supplier of a product implements a policy relating to the prices at which resellers advertise their products or similar types of terms in supplier distribution or resale agreements).
CANADA’S AMENDED
PRICE MAINTENANCE PROVISIONS
Unlike Canada’s former criminal price maintenance offences (under section 61 of the Competition Act) that applied to mere attempts to influence upward or discourage the reduction of a reseller’s prices, for section 76(1)(a)(i) to apply, a reseller’s price (or advertised price) must actually be influenced upward by the producer/supplier by “agreement, threat, promise or any like means”.
For more information about the 2009 amendments to the Competition Act, which repealed the former criminal price maintenance offences under section 61, see: Competition Act Amendments.
Section 76 is also broad enough to include influencing a reseller’s prices upward by both direct and indirect means and includes a reseller’s advertised price and not merely its actual resale price.
There has been one case to date decided on the merits under the civil section 76 of the Competition Act since it was enacted in 2009 (Commissioner of Competition v. Visa Canada Corp) (see: Competition Tribunal Releases Public Reasons in Visa/MasterCard Price Maintenance Case).
“AGREEMENT, THREAT OR PROMISE”
Under the former criminal price maintenance provision of the Competition Act (section 61), it was held that an “agreement” – which could be either oral or written – required some constraining effect on another person.
A “threat” has been held to mean an urged course of action that carries with it some sanction or penalty in the form of intimidation, fulmination, harassment or warning.
A “promise” has been held to mean where a supplier offers a customer or reseller some advantage or favourable consequences for maintaining the supplier’s recommended prices.
It was further held under the former section 61 of the Competition Act that it was insufficient to show that a supplier attempted to maintain prices by mere discussion, persuasion, complaints, suggestions, requests or advice.
The Competition Bureau’s position, in its Price Maintenance Enforcement Guidelines, is that an “agreement, threat, promise or any like means” also includes the following: (i) a supplier implicitly or explicitly conferring a benefit on a retailer who adheres to the supplier’s recommended resale or advertised prices or (ii) imposing a penalty on a retailer for disregarding a supplier’s recommended resale prices.
COMPETITIVE EFFECTS TEST
(ADVERSE EFFECT ON COMPETITION)
For the Competition Tribunal to make an order under section 76(1)(a)(i) it must also be proven that the price maintenance conduct had, is having or is likely to have an adverse effect on competition in a relevant market (i.e., merely influencing a reseller’s price or advertised price upward is not sufficient to obtain a Tribunal order without the required competitive effects test also being established).
While likely not determinative, in evaluating whether price maintenance conduct has an adverse effect on competition, whether a supplier possesses market power would likely be a key factor. In this respect, the Competition Bureau’s position is that a market share of less than 35% will typically not prompt further examination under section 76.
It remains unclear, however, how the Competition Tribunal will approach market definition and the competitive effects test under section 76 in relation to MAP, minimum price and similar types of supplier/producer policies given the relative lack of case law to date under the amended civil price maintenance provisions of the Competition Act.
SECTION 76 DEEMING PROVISION
In addition to section 76(1)(a)(i), the Competition Act also includes a deeming provision (section 76(6)), under which a supplier’s publication of an advertisement that mentions the resale price for a product is deemed to satisfy the “influencing upward” element under section 76(1)(a)(i) unless the price is expressed in a way that makes it clear to anyone reading the advertisement that the product may be sold at a lower price.
The Competition Bureau has provided suggested disclaimer language in its price maintenance guidance that, in its view, will meet this requirement.
POTENTIAL PRICE MAINTENANCE PENALTIES
Unlike the former criminal offence (section 61), price maintenance is not prohibited per se under section 76 of the Competition Act.
The current civil provisions require that, in addition to all of the elements of one of the three types of price maintenance set out under section 76 being met, that a competitive effects test also be met (i.e., an adverse effect on competition in a relevant market).
Price maintenance under section 76 of the Competition Act can be enforced by either the Competition Bureau or private parties that first obtain leave to make an application from the Competition Tribunal.
Criminal fines, administrative monetary penalties (AMPs) or damages are not available under section 76.
The only remedies that can be ordered by the Competition Tribunal under section 76, in the event of a successful application by either the Competition Bureau or a private applicant, are to cease the conduct or, in the case of a refusal to supply based on another person’s low pricing policy, to accept the person as a customer on usual trade terms.
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For more information about price maintenance under the Competition Act, see: Price Maintenance, Competition Act Amendments, Minimum Price Policies, Competition Law Enforcement and Refusal to Deal.
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