Abuse of dominance in Canada

Abuse of dominance

How is abuse of dominance defined and identified? What conduct is subject to a per se prohibition?

Both the effect on the market and the type of conduct involved determine whether a practice is considered abusive. Specifically, the Tribunal will only make an order if, in addition to the finding of dominance (see questions 2 and 9 for more details), the dominant firm or firms have engaged in or are engaging in a practice of anticompetitive acts, and the practice has had, is having or is likely to have the effect of preventing or lessening competition substantially in a market.

Practice of anticompetitive acts

Section 78 of the Act contains a list of anticompetitive acts that would be caught under the abuse provisions. The list is non-exhaustive and in practice, the abuse of dominance provisions can apply to a wide range of anticompetitive conduct.

In order to be considered ‘anticompetitive’, an act must be exclusionary, disciplinary or predatory towards a competitor in its purpose or reasonably foreseeable effect. This may be proven directly by evidence of subjective intent or inferred from the reasonably foreseeable consequences of the conduct.

Certain acts not specifically directed at competitors could still be considered to have an anticompetitive purpose (see question 5 for more details).

A ‘practice’ of anticompetitive acts under the abuse provisions generally requires more than a single act but could be met by a single act that has an ongoing or systemic effect or a lasting impact in a market. A practice may also consist of different forms of anticompetitive conduct, not only repeated use of the same conduct.

Substantial lessening or prevention of competition

The test for establishing the practice’s effect on the market is the ‘but for’ test: ‘but for the impugned conduct, would there likely be substantially greater competition (including in terms of lower consumer prices, substantially greater product selection, quality, innovation or more frequent switching) in the market in the past, present, or future’.

Effectively, this criterion requires a consideration of the actual economic effects of the impugned conduct.

Does the concept of abuse cover both exploitative and exclusionary practices?

Yes, the concept of abuse covers both exploitative and exclusionary practices as long as they have the requisite exclusionary, disciplinary or predatory effect on a competitor and lead to a substantial prevention or lessening of competition in the relevant market (see question 10 for more detail; see ‘Specific forms of abuse’ for examples of specific forms of practices).

What link must be shown between dominance and abuse? May conduct by a dominant company also be abusive if it occurs on an adjacent market to the dominated market?

While there is no explicit requirement that a causal link between dominance and abuse be proven, all three elements of the abuse of dominance must be established for the Tribunal to grant a remedy.

Where a dominant company engages in conduct in a market adjacent to the dominated market, that conduct cannot be abusive unless the company is also found dominant in that adjacent market. That said, ‘dominance’ is not necessarily restricted to firms that compete directly in the relevant market and in some circumstances may include firms that have an ability to indirectly influence participants or competition in the market, or both. Further to the TREB case, in principle a firm that does not compete directly in the adjacent market could nonetheless be found to be dominant in such market.

See questions 5, 9 and 10 for more details.

What defences may be raised to allegations of abuse of dominance? When exclusionary intent is shown, are defences an option?

There is no efficiency defence to an allegation of abuse of dominance. The Tribunal may, however, consider whether any prevention or lessening of competition is attributable to the superior competitive performance of the dominant firm (eg, owing to economies of scope or scale, lower costs, innovation).

In addition, valid business justifications, although not a defence, can be adduced to rebut evidence that the purpose of the conduct in question is anticompetitive. To be valid, business justification must have a credible efficiency or pro-competitive rationale (eg, reducing costs of production or operation, improving technology or production processes, improving product quality or service), and must relate to and counterbalance the anticompetitive effects or subjective intent of the acts. Improved consumer welfare is not, on its own, sufficient to establish a valid business justification; nor is mere self-interest.