This bulletin is the first in a series of bulletins that cover developments in competition and foreign investment review law during 2008.
Investigation of ICBC
In August, 2008, the Competition Bureau announced that it had closed its investigation of certain practices of the Insurance Corporation of British Columbia. The Bureau had commenced an inquiry in February, 2007, to determine whether certain ICBC policies regarding affiliated brokers and access to ICBC’s online customer database constituted an abuse of dominance under section 79 of the Canadian Competition Act. The Bureau concluded that ICBC held a dominant position in the BC market for optional auto insurance, but that the evidence did not establish that the alleged anti-competitive practices were, are or are likely to have a substantial effect on competition in light of the large number of unaffiliated brokers in BC and the evidence that ICBC’s database policy (which prohibited brokers from using customer data from ICBC’s online database for use in preparing quotes and processing transactions for optional insurance offered by private insurers) represented an “inconvenience” but did not have a substantial impact on competition. The Bureau did not make a determination on whether or not ICIB’s policies qualified as anti-competitive acts holding that although the policies were potentially exclusionary, further investigation of possible business justifications would be required to determine if the policies had the requisite anti-competitive purpose to constitute anti-competitive acts.
Information Bulletin on the Application of the Abuse of Dominance Provisions to the Telecommunications Industry
In June, the Bureau released an Information Bulletin on the application of the abuse of dominance provisions of the Competition Act to the telecommunications industry. An earlier version of the Bulletin had been released in draft form for comment. The Bulletin tracks the approach set out in Bureau’s general Enforcement Guidelines on Abuse of Dominance. However, the discussion of the abuse provisions has been updated to reflect the decision of the Federal Court of Appeal in Canada Pipe and includes some specific guidance on the Bureau’s likely approach to market definition issues for telecommunications services and to specific conduct, such as denial of access, predatory and targeted pricing, and bundling, which the Bureau considers are more likely to be the subject of inquiry in the telecommunications industry.
Readers should also note that in January, 2009, the Bureau released for comment revised draft guidelines on its general approach to enforcement of the abuse of dominance provisions. The draft amends the Bureau’s existing guidelines to reflect the Canada Pipe decision and other case law that has developed since the existing guidelines were issued in 2001 and to reflect developments in economic thinking, among other things.
Refusal to Deal – Nadeau Poultry Farm
In March, 2008, the Competition Tribunal granted Nadeau Poultry Farm leave to bring an application for refusal to deal against four companies that had announced their intention to cease supplying live chickens to Nadeau’s processing plant in New Brunswick. In June, 2008, the Tribunal granted an interim order requiring the respondents to continue to supply live chickens to Nadeau, pending a decision by the Tribunal on Nadeau’s refusal to deal application. On June 8, 2009, the Competition Tribunal dismissed the application and issued its Confidential Reasons for Order and Order. A public version of the reasons will be issued by the Tribunal sometime after July 10, 2009. The case raises interesting issues related to the interplay between Federal-Provincial agricultural supply management systems and the elements of the refusal to deal provision of the Competition Act.
Dismissed Applications for Leave
The Tribunal dismissed four applications by private parties seeking leave to bring proceedings under the Competition Act. In Annable v. Capital Sports and Entertainment, the Tribunal dismissed an application for leave to challenge the respondent’s practice of offering multi-game ticket packages for Ottawa Senators games holding that the applicant had failed to provide any evidence of the effect of the alleged tied selling on the applicant’s business or with respect to the anti-competitive effects described in section 77(2) of the Act. In Canadian Standard Travel Agent Registry v. International Air Transport Association, the Tribunal dismissed CSTAR’s request to commence a proceeding under the refusal to deal provision in respect of IATA’s elimination of paper ticketing, on grounds that CSTAR had failed to provide evidence that its business would be directly and substantially affected by the alleged conduct. In Swenson Inc. v. Trader Corporation, the Tribunal dismissed Swenson’s request for leave to bring a refusal to deal application (without prejudice to refiling in the future) as Swenson had not made its affiant available for cross-examination by the respondent within a reasonable period of time. Finally, in Steven Olah v. Her Majesty the Queen as represented by the Correctional Service of Canada et al., the applicant sought leave to challenge a requirement that inmates purchase certain merchandise exclusively from a Home Hardware store under section 77 of the Act. The Tribunal dismissed the application against the Crown given the limited application of the Act to commercial activity of agents of the Crown; in this case the application was made directly against the Crown and did not involve commercial activity. The Tribunal also dismissed the application as against Home Hardware holding that conduct did not qualify as exclusive dealing and further that there was no evidence that the applicant would be directly and substantially affected in his business or that the elements of exclusive dealing could be satisfied.
Marketing and Advertising
Key marketing/advertising law developments in 2008 included the following:
Environmental Claims Guidelines
In June 2008, Environmental claims: A guide for industry and advertisers (the “Guide”), developed by the Canadian Standards Association in partnership with the Competition Bureau, was released. The Guide is a “best practices” guide intended to help businesses interpret ISO 14021 (international standard on environmental labelling adopted by the Canadian Standards Association) and comply with the laws administered by the Bureau (including the Competition Act and the Consumer Packaging and Labelling Act). It will be used by the Bureau when considering whether an environmental claim is false or misleading.
The Guide contains many examples of “preferred” and “discouraged” claims. The Guide contains a detailed discussion of 18 specific requirements applicable to “self-declared environmental claims” that are set out in CAN/CSA-ISO 14021. Among them, self-declared environmental claims: “shall be accurate and not misleading”, “shall be substantiated and verified”, and “shall be true not only in relation to the final product but also shall take into consideration all relevant aspects of the product life cycle in order to identify the potential for one impact to be increased in the process of decreasing another” (the Guide states that “environmental claims should consider the entire life cycle of the product to ensure there is a net environmental benefit”).
Among other things, the Guide discourages “vague and non-specific” claims such as “environmentally friendly”, “ecological (eco)” and “green”, noting, among other things, that such vague claims “should be reserved for products/services whose life cycles have been thoroughly examined and verified”. The Guide also discusses when it is appropriate to make claims that a product is “free” of certain ingredients or substances, and provides guidance respecting the use of symbols (including the Mobius loop) and respecting certain specific claims (such as “recyclable”, “recycled content”, “compostable”, etc.).
There is a one year transition period (ending June 2009) to allow companies to reassess their advertising and labeling in light of the Guide. It is also important to note that, according to an Interpretation Guideline issued by Advertising Standards Canada, the Guide may be taken into account when environmental claim complaints are considered under the ASC process.
Draft Multi-Level Marketing and Scheme of Pyramid Selling Information Bulletin
In April 2008, the Competition Bureau released for public comment its Draft Multi-level Marketing and Scheme of Pyramid Selling Sections 55 and 55.1 of the Competition Act information bulletin. The final bulletin was released in April 2009.
In the enforcement area, we saw, among other things, activity relating to performance claims. Under the Competition Act, performance claims must be based on adequate and proper tests conducted prior to the making of the representations. Competition Tribunal proceedings in 2008 relating to performance claims included:
- The Commissioner of Competition v. Imperial Brush Co. Ltd. and Kel Kem Ltd. (C.O.B. as Imperial Manufacturing Group) – decided by the Tribunal. Note that, in this case, paragraph 74.01(1)(b) of the Competition Act (which deals with statements, warranties or guarantees of performance, efficacy or length of life of a product, not based on adequate or proper tests), was upheld as constitutional (as a justifiable limit on infringement of freedom of expression) and the respondents were found to have failed to conduct proper and adequate tests and thus to have engaged in reviewable conduct.
- The Commissioner of Competition v. Premier Career Management Group Corp. and Minto Roy - decided by the Tribunal. In this case, the Tribunal held that oral representations made one-on-one to many people were not representations “to the public” (as representations were not accessible to the marketplace); and thus the Commissioner’s application was dismissed. The Commissioner has appealed the Tribunal’s decision to the Federal Court of Appeal.
“Made in Canada” Guidelines for Food Labelling
Last year, the Government released a discussion paper proposing new guidelines to redefine what the terms “Product of Canada” and “Made in Canada” mean when used in food labelling and advertising. The guidelines are, among other things, primarily intended to avoid misleading claims and used by the Canadian Food Inspection Agency to ensure compliance with laws against false and misleading representations. For further information on these guidelines, see our previous bulletins Changes Proposed to “Made in Canada” Food Advertising Guidelines, online: http://www.fasken.com/antitrust_competition_marketing_bulletin_june2008/, and New "Made in Canada" Labelling Rules Effective January 1, 2009, online: http://www.fasken.com/new_made_in_canada_rules/. The revised guidelines became effective on December 31, 2008.