January 30, 2013
Earlier today, Canada’s Interim Commissioner of Competition John Pecman delivered remarks in Montreal on the Competition Bureau’s current activities and priorities. In this, Mr. Pecman’s third speech since taking over from the former Commissioner (see previous speeches here and here), he discussed the Bureau’s use of section 11 orders, consent agreements, misleading advertising, cartels and its work with Quebec’s anti-corruption unit.
Some of the aspects of the Interim Commissioner’s remarks that I found interesting included confirming work to develop price maintenance guidelines and updated FAQs for the Bureau’s Leniency Program and announcing that the first course of action to obtain information from targets in formal inquiries in non-merger cases (except in exceptional cases) will be through section 11 court orders.
With respect to the Bureau’s sterner and increased use of section 11 orders, the Interim Commissioner indicated that the Bureau’s new approach had stemmed from an increased frustration with obtaining complete and timely information through voluntary information requests. Where the Bureau has commenced a formal inquiry, it may request information voluntarily or compel production through section 11 orders or through the use of search warrants. Also, as with the Bureau’s increased enforcement stance in other areas, notably cartels, the Interim Commissioner emphasized a desire in his section 11 related remarks today for the Bureau to use all of the tools Parliament had provided in the Competition Act.
January 29, 2013
The Canadian Bar Association’s Anti-Corruption Team (CBA-ACT), which is a joint committee composed of members of the Competition, Business and International sections of the CBA, as well as the CCCA, has launched a new Anti-Corruption website. The new site includes, among other things, links to global anti-corruption legislation, relevant case law (e.g., the recent Griffiths Energy case and Niko Resources) and links to a variety of international resources.
From the CBA:
“The CBA’s Anti-Corruption Team (CBA-ACT) is a joint committee comprised of members from the International, Business, and Competition law sections as well as CCCA. The CBA-ACT was established to monitor and respond to all matters involving corrupt practices and to provide an educational resource centre for Canadian lawyers. Building on over a decade of CBA work in the area of anti-corruption and anti-bribery, the CBA-ACT focuses on providing Canadian lawyers with a place to learn about anti-corruption legislation, case law, and compliance requirements. The CBA-ACT takes a proactive advocacy role and emphasizes the implementation and enforcement of corruption legislation, including the Canadian Corruption of Foreign Public Officials Act, the U.K.’s Bribery Act, and the U.S. Foreign Corrupt Practices Act. The team will work to advocate strategies and policy designed to help lawyers prevent and eradicate corruption. The CBA-ACT will identify issues in corruption both nationally and internationally and will provide lawyers in Canada with tools to help their clients.”
January 28, 2013
I am pleased to announce the launch of my new website: Canadian Contest & Promotions Law (www.contestlawyer.ca). The new website includes overviews of key aspects of running promotional contests in Canada (including Competition Bureau policies, application of the federal Competition Act and Criminal Code and Canadian advertising law issues) and frequently asked questions (FAQs) about Canadian contest/sweepstakes laws, guidelines and enforcement.
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Do you need contest rules/precedents
for a Canadian contest?
We offer many types of Canadian contest/sweepstakes law precedents and forms (i.e., Canadian contest/sweepstakes law precedents to run common types of contests in Canada). These include precedents for random draw contests (i.e., where winners are chosen by random draw), skill contests (e.g., essay, photo or other types of contests where entrants submit content that is judged to enter the contest or for additional entries), trip contests and more. Also available are individual Canadian contest/sweepstakes precedents, including short rules (“mini-rules”), long rules, winner releases and a Canadian contest law checklist. For more information or to order, see: Canadian Contest Law Forms/Precedents. If you would like to discuss legal advice in relation to your contest or other promotion, contact us: Contact.
January 28, 2013
In a decision in December, issued today (see: Green v. Tecumseh Products of Canada Limited, 2012 BCSC 2026), the BC Supreme Court approved a settlement with two defendants in a competition class action involving alleged price-fixing of cooling compressors.
The class proceedings in this case began in October, 2010 on behalf of BC residents that purchased cooling compressors and other products manufactured by the settling defendants and other defendants. According to the plaintiff, the defendants allegedly fixed cooling compressor prices or allocated markets and customers in Canada.
In October, 2010, the Bureau announced that Embraco North America Inc. plead guilty and was fined $1.5 for participating in fixing the price of cooling compressors (see: Embraco North America Inc. Pleads Guilty to Price-Fixing Conspiracy). In November, 2010, the Bureau made a similar announcement in relation to Panasonic Corporation (see: Panasonic Corporation Pleads Guilty to Price-Fixing Conspiracy).
As part of the settlement in the decision issued earlier today, the two settling defendants ACC USA LLC and ACC Sp.A, with a relatively small combined volume of commerce in Canada, entered into a settlement agreement with the plaintiff, agreed to pay $50,000 (and costs up to a further $50,000) and to cooperate with the plaintiff.
January 28, 2013
Earlier today, the CRTC published its anticipated draft Wireless Code, which will be subject to public comments until February 15, 2013 (see: Help Develop a Wireless Code). According to the CRTC, it has received 3,500 written comments and about 600 online comments, which were reviewed in preparing the new draft Code. This second phase of public comments will also include a public hearing to be held from February 11th to 15th in Gatineau.
In making the announcement CRTC Chairman Jean-Pierre Blais said:
“I would like to thank Canadians for having shared their candid views on wireless services. … The draft code is still very much a work in progress and intended to encourage more discussion. We are inviting Canadians to participate by telling us what they think of the working document. Once finalized, the wireless code will enable them to make informed decisions in a competitive marketplace.”
The draft Code has arisen as a result of growing consumer frustration with wireless contracts, terms of service, fees and disclosure, as well as a desire by industry members to have a single federal code, rather than multiple provincial regimes.
The draft Code addresses major topics including enforcement, contracts, fees (clarity of advertised prices, additional fees, etc.), repairs, unlocking devices and loss/theft. Some of the aspects of the new draft Code that caught my eye, which according to the CRTC is only “intended to stimulate debate and does not constitute a preliminary view” by the CRTC, include:
1. Conflict provisions benefiting consumers (i.e., contemplating that the new Code will co-exist with existing provincial legislation with consumers having the benefit of the most consumer-favorable provisions).
2. Cancellation rights for contracts agreed to by phone or online (allowing consumers to cancel agreements without penalties where they have not either received a copy of the contract or written terms conflict with phone/online sales terms).
3. Penalties that may include explanations/apologies for consumers, undertakings to take steps (or stop conduct) and monetary penalties of up to $5,000.
January 26, 2013
Steve Szentesi
Kevin Wright (Davis LLP)
(with contributions by Jonathan Gilhen – Davis LLP)
Extract from a chapter to be published in CLEBC’s
Annual Review of Law & Practice – 2013
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2012 was a busy year for Canadian competition and foreign investment law, with significant developments in all major areas including misleading advertising, mergers, abuse of dominance, criminal matters (including cartels, bid-rigging and deceptive marketing) and private actions. The following is an overview of some of the key abuse of dominance, private action and other competition developments in 2012.
Abuse of Dominance
Commissioner of Competition v. The Toronto Real Estate Board
In Commissioner of Competition v. The Toronto Real Estate Board, the Competition Bureau (the “Bureau”) commenced an abuse of dominance application against The Toronto Real Estate Board (“TREB”), Canada’s largest real estate board. The Bureau is alleging that TREB is dominant in the residential real estate services market in the Greater Toronto Area (“GTA”), certain TREB membership rules governing the use of its multiple listing service or “MLS®” data are anti-competitive and that competition has been substantially lessened in the relevant market (residential real estate services in the GTA).
In particular, the Bureau’s challenge involves TREB membership rules governing the use of its MLS® data that the Bureau argues restrict or prevent members from offering various innovative new services over the Internet, such as “virtual office websites” or “VOWs” that would allow potential clients to conduct their own property searches on brokers’ password protected websites without the assistance or involvement of brokers. The Bureau is arguing that TREB’s restrictions on using its MLS® data for VOWs has prevented the development of more efficient and cost effective business models by forcing existing members to use traditional broker models and prevented members from joining TREB to launch new Internet based services.
TREB in turn has argued that the rules for the use of its MLS® system are a legitimate exercise of intellectual property rights, its policies do not substantially prevent or lessen competition, that some proposed uses of its data raise privacy concerns and that it cannot be dominant in a market in which it does not participate (as a trade association it does not itself provide any real estate services).
Like the Bureau’s 2009 abuse of dominance challenge against The Canadian Real Estate Association, this case also focuses on membership rules and access to the MLS® system, and more specifically TREB’s ability to exclude and discipline non-compliant members by foreclosing access to its MLS® data. This case was ongoing at the time of writing.
New Abuse of Dominance Enforcement Guidelines
In September 2012, the Bureau issued new Abuse of Dominance Guidelines (“Abuse Guidelines”) that set out its enforcement policy for the civil abuse of dominance provisions of the Competition Act (the “Act”) (sections 78 and 79). The Bureau’s new Abuse Guidelines replace its former 2001 guidelines and several sector- and conduct-specific guidelines and bulletins relating to the airline, grocery and telecommunications industries and predatory pricing.
The new Abuse Guidelines are substantially shorter with significantly less analysis and fewer examples than the Bureau’s previous guidelines. In general, they also provide less comfort for firms regarding several key concepts, notably potential investigation risk in the absence of market power or conduct that is not exclusionary. They also introduce some new and somewhat controversial positions by the Bureau. Some key aspects of the new Abuse Guidelines include:
Preserving market share thresholds with no bright line safe harbors. As before, the new Abuse Guidelines contain no bright-line market share safe harbours below which the Bureau may not commence enforcement (for single firm dominance, a market share of less than 35% will generally not prompt further examination; between 35% and 50% will prompt further examination if a firm appears likely to increase its share through anti-competitive acts; and more than 50% will generally prompt further examination).
Expanding when the Bureau may investigate allegations of abuse. The new Abuse Guidelines state that the Bureau may investigate allegations of abuse of dominance in some instances even where a firm does not currently possess market power.
Joint dominance. The Abuse Guidelines provide new guidance on the degree of coordination the Bureau considers necessary for joint dominance, adopting a new approach to assess joint dominance (considering the ability of existing and potential competition to restrain firms’ market power and competition between firms) and stating that similar or parallel conduct alone is insufficient to conclude that firms are jointly dominant.
Enforcement in the absence of exclusionary conduct. The Abuse Guidelines also indicate that the Bureau may take enforcement action in some cases where conduct is not exclusionary (i.e., not only where a dominant firm engages in conduct that is predatory, exclusionary or disciplinary toward a competitor, the test for an anti-competitive act established by the Tribunal and the Federal Court).
Valid business justification. The Abuse Guidelines discuss what may constitute a valid business justification for the second branch of the test for abuse of dominance under section 79 with some examples, including reducing costs or improvements in technology. While the Federal Court of Appeal held in the leading Canadian abuse of dominance case, Canada Pipe, that proof of a valid business justification for allegedly anti-competitive conduct can offset and provide an alternative explanation for conduct, Canadian courts and the Bureau have to date provided little guidance as to what may in fact constitute a valid business justification.
January 25, 2013
The National Competition Law Section of the CBA will be holding its annual Competition Law Spring Forum in Toronto on May 28, 2013. From the CBA:
“Competition law and enforcement in Canada are in a state of flux. The impact of the Competition Bureau’s recent leadership change on future enforcement activity remains to be seen. The Bureau’s leniency program is under scrutiny as a result of recent decisions in Maxzone and Couche-Tard. And a number of important decisions are pending, including: (1) the Supreme Court of Canada’s decision in Pro-Sys which will determine the fate of indirect purchaser class actions in Canada; (2) the Competition Tribunal’s decisions in the Visa/MasterCard and TREB cases; (3) the Federal Court of Appeal’s decision in the CCS merger challenge. We invite you to come and hear leading experts discuss and debate these and other important issues.”
January 25, 2013
Steve Szentesi
Kevin Wright (Davis LLP)
(with contributions by Jonathan Gilhen – Davis LLP)
Extract from a chapter to be published in CLEBC’s
Annual Review of Law & Practice – 2013
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2012 was a busy year for Canadian competition and foreign investment law, with significant developments in all major areas including misleading advertising, mergers, abuse of dominance, criminal matters (including cartels, bid-rigging and deceptive marketing) and private actions. The following is an overview of some of the key criminal developments, with summaries of other significant developments in 2012 to come over the next few days.
Criminal Code
Sentencing Amendments
In March 2012, amendments to section 742.1 of the Criminal Code (the “Code”), which were part of the Federal Government’s omnibus crime bill (Bill C-10), received Royal Assent. The changes, which came into force in November 2012, restrict the availability of conditional sentences, including for some offences under the Competition Act (the “Act”). In particular, where a person is convicted of an offence and the court imposes a sentence of less than two years, the court may order a conditional sentence (i.e., served in the community), except in certain circumstances. Those now include where an offence is an indictable offence with a maximum term of imprisonment of 14 years or life, which includes sections 45 and 47 of the Act (conspiracy and bid-rigging). These changes to the Code will impact sentencing in competition law cases (i.e., eliminate the ability for courts to impose conditional sentences in some cases). They may also influence whether cases go to trial or settle and whether individuals who are not eligible under the Competition Bureau’s (the “Bureau”) Immunity Program will cooperate with the Bureau under its Leniency Program, which, unlike the Immunity Program, requires guilty pleas as one condition.
DomFoam
(First Amended Competition Act Conviction)
In January 2012, the Bureau announced the first conviction under the Act’s amended conspiracy provisions. Domfoam International Inc. and Valle Foam Industries Inc. pleaded guilty to conspiracy under section 45 of the Act and were fined a total of $12.5 million for participating in a price-fixing conspiracy for polyurethane foam. The Bureau relied on wiretaps and search warrants in its investigation, as well as companies that cooperated with the Bureau under its Immunity and Leniency Programs.
Maxzone
(Cartel Sentencing)
In an important Federal Court decision issued in September, 2012 in the ongoing global auto parts price-fixing investigation (R. v. Maxzone Auto Parts (Canada) Corp., 2012 FC 1117), Chief Justice Crampton set the stage for the Court’s future approach to joint sentencing submissions for cartel cases. The Court’s reasons relate to its earlier decision to accept joint sentencing submissions imposing a $1.5 million fine on Maxzone in this price-fixing case (Maxzone pleaded guilty to one count of contravening the foreign directed conspiracy provision of the Act).
Several key points come out of this decision. First, parties making sentencing submissions must do more than adopt the mathematical approach to fines set out in the Bureau’s Leniency Program Bulletin, which establishes 20% of the affected volume of commerce in Canada as a starting point for fine negotiations. Second, while the Bureau’s Leniency Bulletin can be an appropriate framework for sentencing submissions, it must be followed in “letter and spirit” relating to the Code’s sentencing principles (i.e., the fundamental purpose and objectives of sentencing, principle of proportionality and aggravating and mitigating factors). Third, the Court indicated that it will require significantly more detailed evidentiary records and submissions in the future to be satisfied that a recommended sentence will not be contrary to the public interest or bring the administration of justice into disrepute. These include either an estimate of the illegal profits gained (or evidence an accused has made restitution to victims). The Court will also require a good sense of any relevant aggravating and mitigating factors (and how they influenced the jointly recommended fine) and sufficient information to determine whether the recommended sentence appropriately reflects the sentencing principles set out in the Code.
The Court also discussed individual sentencing in cartel cases, recognizing that it may be in the public interest for the Crown to agree to refrain from seeking imprisonment in some cases (e.g., directors, officers or employees of the first company to seek leniency) while at the same time indicating that subsequent leniency applicants may be asked to justify why individual imprisonment is not appropriate. Overall, this recent decision signals an increasingly stern view of cartel sentencing by the Federal Court and a caution the Court will not rubber-stamp mathematically derived sentencing submissions.
Recent Bid-rigging Cases
There have been a number of high-profile bid-rigging cases brought recently by the Bureau and Director of Public Prosecutions, many in relation to the construction industry in Quebec. A few of these cases are summarized below.
Sewer Services in Quebec
In November 2011, the Bureau announced it launched an investigation into bid-rigging (under section 47 of the Act) for municipal and provincial specialized sewer services contracts in the greater Montreal region. As of December 20, 2012, seven companies and seven individuals have been charged, of which three companies and one individual have plead guilty and received a total fine of $140,000, for the three companies, and the individual was sentenced to perform 100 hours of community service.
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
