BUREAU’S NEW PRICE MAINTENANCE ENFORCEMENT GUIDELINES
On September 15, 2014, the Competition Bureau (Bureau) published its Price Maintenance Enforcement Guidelines (Guidelines). These Guidelines describe the Bureau’s approach to enforcing section 76 of the Competition Act (Act), a civil provision focused on conduct that influences the price at which a downstream supplier sells its products and which has an adverse effect on competition. The Guidelines are non-binding on the Bureau but nevertheless provide important clarity for companies operating in Canada as to how the Bureau will apply the Act to a number of common distribution practices.
The Guidelines suggest a conservative approach to section 76 but have regard to a number of important economic concepts. For example, the Guidelines recognize that the existence of “market power” is a “key factor” in determining whether conduct is capable of having an adverse effect on competition. By further example, the Guidelines recognize that – depending upon the circumstances – resale price maintenance and other distribution practices are capable of enhancing inter-brand competition and expanding output.
BUREAU’S ANALYTICAL APPROACH TO RETAIL MERGERS
On September 15, 2014, the Bureau’s T.D. MacDonald Chair in Industrial Economics, Renée Duplantis, published a white paper that describes the economic tools and techniques the Bureau uses when analyzing retail mergers. While the white paper is concerned most directly with the retail sector, the tools and techniques described in it – particularly as they concern the assessment of market power – can be equally useful when analyzing mergers in other industries if the necessary data are available.
The white paper is consistent with the approach that the Bureau has adopted in its review of prior retail mergers. For example, the white paper describes an approach to product and geographic market definition that focuses on store format and “bricks-and-mortar”/local competition; the white paper does not discuss how sales of consumer goods made over the Internet or national pricing/price-matching strategies could affect the Bureau’s analysis. By further example, the white paper describes the types of analyses the Bureau might undertake when testing for the existence of market power, including empirical examination of natural experiments, upward price pressure analyses (as a screen) and the construction of merger simulation models. The white paper also describes how the Bureau will assess the monopsony power of retailers over their suppliers, including testing for the existence of the so-called “waterbed” effect where a firm’s exercise of bargaining power results in its rivals paying higher prices for inputs – which could, at least in theory if a number of assumptions are proven to exist – have a negative effect on output.
CANADA RATIFIES INVESTMENT TREATY WITH CHINA
On September 12, 2014, the Government of Canada ratified a Foreign Investment Promotion and Protection Agreement (FIPA) between Canada and China that had been originally agreed in 2012. The Canada-China FIPA will take effect on October 1, 2014.
While the Canada-China FIPA provides Canadian investors in China and Chinese investors in Canada with numerous protections, carve-outs ensure that the Canadian government can continue to review (and condition or prohibit) investments in Canada by foreign investors under the Investment Canada Act. The operation of the Investment Canada Actis particularly important as it concerns investments from Chinese firms since (i) investments by Chinese state-owned enterprises have represented some of the largest investments in Canada in recent years and (ii) there are special rules under the Investment Canada Act that apply to such state-owned enterprises. Observers are interested to see what effect, if any, the Canada-China FIPA has on investment levels between Canada and China.