On January 16, 2009, Canada's Competition Bureau (the Bureau) released draft revised Abuse of Dominance Guidelines1 (the Updated Guidelines), which are intended eventually to replace the original guidelines released in 2001.
Abuse of dominance occurs when a dominant firm (or group of firms) in a market engage in a practice of anti-competitive acts with the result that competition is prevented or lessened substantially in a market. Sections 78 and 79 of the Competition Act2 set out the powers of the Competition Bureau to prohibit a dominant firm (or group of firms) from engaging in anti-competitive practices, or to require other remedial action if necessary to restore competition. At present, no damages or fines for abuse of dominance are provided for under the Act, although amendments to introduce fines have been proposed by the Government. To prove abuse of dominance, three principal elements must be established:
1. one or more persons substantially or completely controls, throughout Canada, a class or species of business;
2. the person or persons have engaged in a practice of anti-competitive acts; and
3. the practice has had, is having, or is likely to have the effect of preventing or lessening competition substantially.
The Updated Guidelines do not represent a fundamental shift in the Bureau's enforcement policy, but rather expand upon the original guidelines and revise them in light of recent jurisprudence and developments in economic thinking. Most notable among these is the decision of the Federal Court of Appeal in the Canada Pipe3 case, which provided the first opportunity for the Federal Court to consider the application of the abuse of dominance provisions in sections 78 and 79 of the Act. Other relevant events include the publication of two separate bulletins clarifying the Bureau's approach to the abuse of dominance provisions in the context of the retail grocery and telecommunications industries, respectively.4
Notable changes from the original guidelines include:
- An updated explanation of how the Bureau will assess market power, including the application of the "hypothetical monopolist" test in defining the relevant market.
- An updated approach to joint dominance. According to the Updated Guidelines, the Bureau will consider joint dominance where the firms appear to collectively hold market power based on their combined share of the market, and are engaged in similar alleged anti-competitive practices. In determining issues of joint dominance, the Bureau will also address, among other factors, barriers to entry or expansion in the affected market. The Updated Guidelines do not seem to require any co-ordinated conduct between the firms and emphasize that the mere exercise of market power on a collective basis does not in and of itself raise any issue under the abuse of dominance provisions.
- An outline of the Bureau's approach to anti-competitive intent and legitimate business justifications in light of the FCA's decision in the Canada Pipe case. The Updated Guidelines indicate that the Bureau may consider valid business justifications for conduct that is allegedly anti-competitive, where it can be demonstrated that the anti-competitive effects were not the predominant purpose of the conduct. However, the Bureau will also consider the necessity of the conduct and whether there is an equally effective manner in which the cost savings could be achieved other than through the conduct in question.
- Expanded discussion of specific forms of anti-competitive conduct, including: exclusive dealing; tying, bundling and bundled rebates; and denial of access to a facility or service.
- Acknowledgement by the Bureau that it may consider a regulated conduct defence in its assessment.
The Updated Guidelines remain in draft form and are open to public comment until April 20, 2009.