Enforcement proceedings in dominance in Canada

Enforcement proceedings

Which authorities are responsible for enforcement of the dominance rules and what powers of investigation do they have?

Responsibility for the enforcement of the dominance rules under the Act falls primarily to the Commissioner, and those to whom the Commissioner delegates responsibilities (ie, the Bureau). The Bureau is empowered to conduct inquiries into potential abuse of dominance behaviour and bring applications before the Tribunal for remedies, subject to various statutory procedural limitations.

During an inquiry, the Bureau has access to a number of formal investigatory tools including the ability to obtain a judicial order under section 11 of the Act to compel oral examination, document production, or a written response to questions, where the Bureau believes grounds may exist for an order. The Bureau has increasingly made use of this tool to compel production in recent years. The Bureau can also obtain a warrant to enter and search premises and seize documents, or in ‘exigent’ circumstances, exercise these rights without a warrant.

What sanctions and remedies may the authorities impose? May individuals be fined or sanctioned?

Violations of the abuse of dominance provisions are subject to prohibition orders and administrative monetary penalties (AMPs).

The Tribunal may issue an order prohibiting the continuation of an impugned practice and in addition, or as an alternative, also has broad discretion to make any other order, where a prohibition order alone is not likely to be sufficient to restore competition in the market.

The Tribunal’s authority to make a restorative order explicitly extends to an order to divest assets or shares, although to date divestiture has never been ordered under section 79 and orders have been limited to behavioural remedies.

The Tribunal may also impose AMPs of up to C$10 million in the first instance or C$15 million for a subsequent order. Pursuant to section 79(3.2) of the Act, the Tribunal is required to consider various factors in determining the amount of an AMP, including the affected sales, actual or anticipated profits, the dominant firm’s financial position, its history of compliance and ‘any other relevant factor’. An unpaid AMP is a debt owed to the Crown and recoverable in any court of competent jurisdiction.

Where an inquiry is ongoing, under certain circumstances the Tribunal may issue an interim order (on application by the Bureau on an ex parte basis) prohibiting conduct that could be subject to an order under the abuse of dominance provisions.

The Bureau sought maximum AMPs of C$10 million and C$15 million, respectively, in recent enforcement actions against two Ontario companies in the residential market for rental water heaters and related services. The two companies ultimately entered into consent agreements with the Bureau and agreed to pay an AMP of C$5 million (plus C$500,000 to the Bureau’s investigation costs) and C$1 million, respectively. The maximum AMPs sought and the penalties ultimately imposed - the first for abuse of dominance in Canada - represent unprecedented remedies in a Canadian abuse of dominance case.

Can the competition enforcers impose sanctions directly or must they petition a court or other authority?

The Bureau cannot impose sanctions directly and must apply to the Tribunal for an order.

It is increasingly common for alleged abuses of dominance to be investigated and initially challenged outside the formal Tribunal process with a view to seeking a negotiated resolution. Negotiated settlements are then recorded in a ‘consent agreement’, which is then registered with the Tribunal and, once registered, carries the legal force of an order of the Tribunal.

What is the recent enforcement record in your jurisdiction?

The Bureau does not publish up-to-date statistics on the number of abuse of dominance investigations commenced or discontinued. However, abuse of dominance ranks very high among Bureau’s enforcement priorities and the abuse of dominance provisions are vigorously enforced.

In recent cases, the forms of abuse that have been prosecuted have varied. For example, TREB dealt with a restriction by the Toronto Real Estate Board of members’ access to multiple listing service information. Recent cases involving residential water heaters involved alleged ‘aggressive retention tactics’ during customer calls, as well as other policies and procedures aimed at hindering switching to competitors. A case in the pharmaceutical sector involved alleged ‘product hopping’ through intentional disruption of the supply of a branded prescription anti-allergy drug in order to limit or prevent meaningful competition from generic drug companies. In the medical devices sector, a recent case involved the imposition of warranty terms relating to one company’s insulin pumps with other companies’ equipment, which allegedly limited competition and restricted consumer choice. A recent case involving an online search engine and advertiser dealt with alleged conduct intended to exclude or disadvantage competitors, including through the imposition of conditions and demands on customers preventing rivals from competing. Another investigation focused on a device manufacturer’s agreements with Canadian wireless carriers. The Bureau’s recently discontinued three-year investigation in the grocery sector targeted a large grocery retailer’s pricing strategies and programmes in the context of its relationship with its suppliers. (See also below and question 8 for more details.)

Based on these recent cases, abuse of dominance cases generally may last between two and five years, from the Bureau’s initiation of an investigation or filing of an application with the Tribunal, to an order of the Tribunal or registration of a consent agreement. It is not uncommon for the Bureau to initiate an investigation that lasts two or more years before the Bureau makes an application to the Tribunal or discontinues the investigation.

In August 2018, the Supreme Court of Canada dismissed an application by TREB seeking leave to appeal a decision of 1 December 2017 of the Federal Court of Appeal, bringing an end to a long-running case that concerned one of the prevailing tests for finding that an abuse of dominance has occurred. The case involved restrictions on TREB members’ provision of direct access to multiple listing service information such as sales inventory, selling price and broker compensation, which the Bureau argued prevented the introduction of internet-based services such as ‘virtual office websites’ through which such information could be made available at low cost. In its original 2013 decision, the Tribunal found that TREB did not compete with its members, and, therefore, could not satisfy this test. However, on appeal, the Federal Court of Appeal held that the abuse of dominance provisions could apply on the basis that TREB controls the market for residential real estate services in the Toronto metropolitan area, even though it is not technically a competitor in that market, and referred the matter back to the Tribunal for reconsideration. Following the rehearing, the Tribunal ruled in April 2016 that abuse of dominance was established; the Federal Court of Appeal’s decision in December 2017 upheld that ruling.

In September 2016, the Bureau also filed a notice of application against the Vancouver Airport Authority (VAA) under the abuse of dominance provisions of the Act with respect to restrictions that decrease competition among in-flight catering companies at Vancouver International Airport. Similar to TREB, the case involves alleged abuse of dominance in a market in which the VAA technically is not a direct competitor. Following further proceedings, the Commissioner and the VAA submitted their closing arguments in November 2018.

In November 2017, the Bureau announced the discontinuation of its three-year investigation into a large grocery retailer, indicating in its Position Statement that it reached two conclusions before deciding to do so: that the retailer in question no longer enforced certain policies (further to an earlier communication by the retailer to its suppliers during the investigation that it would cease to do so effective January 2016), and that, on balance, there was insufficient evidence to conclude that the policies had lessened or prevented competition substantially. At the end of 2018, the Bureau also closed an investigation into practices of three brand name pharmaceutical manufacturers involving attempts to restrict access by generic drug manufacturers to samples of brand name drugs required to prove the bio-equivalency of the generic products. While the Bureau concluded that there was insufficient evidence to demonstrate substantial prevention or lessening of competition (and, as a result, the contravention of the abuse of dominance provisions), it acknowledged that evidence obtained during the investigation supported the generic manufacturers’ position that they faced barriers impeding their access to the branded drugs, which, in some cases, were likely because of the actions of brand manufacturers. In its press release, the Bureau also specifically states that this type of alleged conduct may warrant further enforcement or advocacy action in the future.

In January 2018, the Bureau entered into a settlement agreement with a software development company in the travel industry, pursuant to which the company committed to ending certain restrictive business practices that the Bureau considered to have lessened or prevented competition in markets relating to the supply of ‘all-inclusive’ travel packages.

The Bureau has also recently commenced an investigation into a national airline’s low-cost carrier division, alleging that its below-cost fares amounted to predatory pricing as they were designed to force rivals out of the market.

Where a clause in a contract involving a dominant company is inconsistent with the legislation, is the clause (or the entire contract) invalidated?

In principle, either a clause or the entire contract may be invalidated as part of a behavioural remedy under section 79. A firm may also agree to modify its contractual terms under a consent agreement. (See question 26.)

To what extent is private enforcement possible? Does the legislation provide a basis for a court or other authority to order a dominant firm to grant access, supply goods or services, conclude a contract or invalidate a provision or contract?

There is no private right of action for abuse of dominance in Canada. Only the Commissioner may bring applications or register consent agreements with the Tribunal. However, under section 36 of the Act a private right of action is available where an order of the Tribunal has been violated.

Attempts by private litigants to bring cases on the basis of civil conspiracy or torts alleging an abuse of dominant position have not been recognised, for the reason that unlike the criminal provisions, the civil provisions of the Act address conduct that is presumptively lawful unless and until an order has been granted by the Tribunal.

The Tribunal may order any remedy (structural or behavioural) required to restore competition, including granting access to infrastructure or technology, reinstating supply or goods or services or modifying contractual terms.

Private parties are also entitled to file a complaint with the Bureau with regard to the abuse of dominance provisions. Consumer and competitor complaints are a primary source of leads for Bureau investigations.

Separately, private parties may apply for leave to bring applications before the Tribunal under the refusal to deal (section 75), price maintenance (section 76), and exclusive dealing, tied selling and market restriction (section 77) provisions of the Act, where the underlying requirements of those sections are met. However, AMPs and damages are not available under these provisions, which are technically distinct from the abuse of dominance provisions.

Do companies harmed by abusive practices have a claim for damages? Who adjudicates claims and how are damages calculated or assessed?

There is no statutory right to damages as a result of a finding of an abuse of dominance, although section 36 provides a private right of action where an order of the Tribunal has been violated. (See question 31.)

To what court may authority decisions finding an abuse be appealed?

Decisions of the Tribunal may be appealed to the Federal Court of Appeal, and ultimately to the Supreme Court of Canada. Courts may refer matters back to the Tribunal for redetermination. While appeals on both questions of law and fact are possible, an appeal on a question of fact may be made only with leave of the Federal Court of Appeal.