Canadian COMPETITION LAW

Overview of Resale Price Maintenance
Under Section 76 of the Competition Act

Section 76 of the federal Competition Act regulates resale price maintenance in Canada as a civil reviewable matter.

Section 76 applies, but is not limited to, manufacturer’s suggested retail prices  (MSRPs), minimum resale price policies and minimum advertised price (MAP) policies (e.g., where a distributor or retailer follows a producer’s or supplier’s pricing policy or agrees not to resell a product or advertise a product below a particular price).

Minimum Price Policies and Agreements

Under section 76(1)(a)(i) of the Competition Act, the Competition Tribunal (Tribunal) can make remedial orders where 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) only applies where a reseller’s prices have been actually influenced upward by “agreement, threat, promise or any like means”.

Under the former criminal price maintenance provision, it was held that an “agreement”, 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.

In its Price Maintenance Enforcement Guidelines, the Competition Bureau’s position is that an “agreement, threat, promise or any like means” includes a supplier implicitly or explicitly conferring a benefit on a retailer who adheres to the supplier’s recommended resale or advertised prices or imposing a penalty on a retailer for disregarding a supplier’s recommended resale prices.

It was further held under the former price maintenance provision (section 61) that it was insufficient to show that a supplier attempted to maintain prices by mere discussion, persuasion, complaints, suggestions, requests or advice.

For the Tribunal to make an order under section 76(1)(a)(i) of the Competition Act, however, 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. 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 met.

After Canada’s price maintenance provisions were amended in 2009, Canada shifted from a per se criminal price maintenance offence to a civil market effects based test for the different types of price maintenance under section 76 of the Competition Act.

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 Bureau’s position is that a market share of less than 35% will typically not prompt further examination. It is not yet clear, however, how the 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 that the relative lack of case law to date under the amended section 76.

In addition to section 76(1)(a)(i), the Competition Act also includes a deeming provision (section 76(5)), under which any suggestion by a producer or supplier of a product of a resale price or minimum resale price for a product is deemed to be proof that a retailer has been influenced in its pricing, unless the supplier makes it clear that the retailer: (i) is not obligated to accept the suggestion; and (ii) would in no way suffer in their business relations with the producer or supplier or with any other person if they refuse to accept the suggestion.

Resale Price Maintenance Penalties

Price maintenance, including MSRP, minimum resale price policies and MAP policies, is not prohibited per se under section 76 of the Competition Act. All of the types of price maintenance under section 76 also require that a competitive effects test be met (i.e., an adverse effect on competition in a relevant market).

Fines, monetary penalties or damages actions are not available under section 76.  In this regard, the only remedies that can be ordered by the Tribunal under section 76 are for a party to cease the conduct (or, in the case of a refusal to supply, to accept a person as a customer on usual trade terms).

Also, the Competition Bureau’s position is that it evaluates allegations of price maintenance on a case-by-case basis when considering enforcement action under section 76 and that it will generally give parties an opportunity to respond to the Bureau’s concerns and propose an appropriate resolution, including negotiated consent agreements.

Our MAP, Minimum Price and MSRP Policy Services

We have helped many clients with advice relating to MAP, minimum price and MSRP policies, including reviewing and drafting MAP/minimum price policies, advice on the legal risks of restricting resale or advertised prices and the Competition Bureau’s price maintenance related enforcement policies and guidelines.

We also advise clients as to how to minimize price maintenance, refusal to deal and other Canadian competition law risk relating to distributor, dealer and customer terminations. For more information, see: Refusal to Deal.

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