On March 20, 2014, the Canadian Competition Bureau (the “Bureau”) released new draft Enforcement Guidelines on Price Maintenance (Section 76 of the Competition Act) (“Draft Guidelines”) for public consultation. Though they are still to be finalized, the release of these Draft Guidelines has been eagerly anticipated, particularly in light of the 2009 amendments to the price maintenance provisions in the Competition Act (the “Act”), coupled with the release of the landmark Visa/MasterCard decision handed down by the Competition Tribunal (the “Tribunal”) last year.1 The Draft Guidelines also contain hypotheticals to further explain the Bureau’s enforcement approach.
Price Maintenance Definition
Price maintenance – governed by section 76 of the Act – occurs when a person, directly or indirectly, influences upward or discourages the reduction of another person’s selling or advertised prices by means of a threat, promise or agreement. It may also occur when a person refuses to supply another person or otherwise discriminates against that person because of their low pricing policy. In either case, the actions taken must result in an “adverse effect on competition in a market” (i.e. a market power requirement). In 2009, price maintenance was decriminalized and is now a reviewable practice pursuant to section 76 of the Act. It no longer carries financial penalties or jail time.
Visa/Mastercard Analysis Mentioned Throughout Draft Guidelines
Given its recent release, it is not surprising to find the Visa/MasterCard decision heavily quoted and discussed throughout the Draft Guidelines. The approach taken by the Tribunal in the case was referred to in the discussion of the section’s market power requirement, and indeed, was cited in support of the position that though the Bureau’s general approach is that a market share of less than 35% will not usually prompt further investigation, there may be instances that a firm with a market share below 35% could possess market power.2
Guidance on Refusals to Supply/ Discrimination Due to Low Pricing Policy
The Draft Guidelines confirm that the Bureau will apply a broad approach in considering the application of the refusal to supply/discretion aspects of section 76. For instance, the Bureau asserts that “there is no requirement that a person be an existing or previous customer of a supplier for the “refusal to supply” provision of section 76 to apply”3 thereby potentially expanding the scope of the section. Additionally, the Bureau suggests that the existence of a “low pricing policy” need not be the only or even predominant reason for the refusal or discrimination to supply, but merely a factor informing the supplier’s decision. The Bureau also used the distinction between “policy and practice” in 76(1)(a)(ii) and s. 76(8) to confirm that a “low pricing policy” may exist regardless of if a retailer has actually engaged in the conduct, declaring that mere “stated intent” is sufficient to qualify as a “policy”. These aspects of the Draft Guidelines will attract attention.
Limited Guidance On Minimum Advertised Pricing (“MAP”) Policies
Given the robust demand for guidance on MAP Policies, and the fact that they are still relatively new to Canada following the 2009 amendments, it is somewhat surprising that the Draft Guidelines provide very little guidance in this particular area.
MAP Policies are discussed only briefly in the context of conduct that “directly or indirectly influences upward or discourages the reduction of selling or advertised prices of a product.”4 The Draft Guidelines stated that a suppliers’ mere use of an MAP may alone be sufficient to be considered an “influence” on price, particularly if the Bureau is not convinced that the supplier has sufficiently expressed that there is no obligation or consequence whatsoever to abide by the MAP. Unfortunately, no additional context is provided.
Hopefully this will be addressed in the final version of the Draft Guidelines.
The Draft Guidelines are currently in draft form, and are subject to public consultation until June 2, 2014. Up until that time the Bureau will entertain comments/review from any concerned party.