As we blogged about in December, the Government of Canada has introduced legislation that will grant the Commissioner of Competition broad powers to investigate and report on so-called “price gaps” between Canada and the US (i.e., products or classes of products whose selling price in Canada is higher than their selling price in the US).
The “frequently asked questions” below are intended to assist businesses in understanding (i) who will be affected by the law; (ii) what investigatory powers the Commissioner will have; and (iii) the ultimate outcome of “price gap” reviews.
You can also download a PDF copy of the FAQ.
PART 1: WHO IS AFFECTED?
Q. What is required in order to begin a price gap inquiry?
In order to begin an inquiry, the Commissioner must simply have reason to believe that the selling price of a product (or class of products) is or was higher in Canada than the selling price of that product – or of a similar product or class of similar products – in the US.
The Commissioner is not required to believe that the observed price difference is discriminatory or otherwise unjustifiable. Moreover, the PTA does not require that the selling prices be adjusted to reflect the current exchange rate.
However, in practice, the Commissioner will have limited resources with which to enforce the law. He is unlikely to choose to commence inquiries where price differences are small and clearly justifiable (e.g., explained by the current exchange rate).
Q. Are price gap inquiries limited to products, or can they relate to services as well?
Inquiries can be started with respect to any product or service, or any class of product or service.
Q. Can customers or suppliers force the Commissioner to begin a price gap inquiry into a particular product?
No. Only the Commissioner can begin an inquiry. However, the Commissioner’s enforcement decisions may be informed by complaints he receives from market participants.
Q. Can the Commissioner inquire into price differences between Canada and countries other than the US?
No. The PTA is limited to differences in selling price between Canada and the US.
PART 2: WHAT CAN THEY SEARCH?
Q. Once a price gap inquiry is started, what information-gathering powers will the Commissioner have?
Once an inquiry is started, the Commissioner will be able to seek court orders compelling any person who is likely to have information relevant to the inquiry to: (i) produce any records or documents (including e-mails, voicemails, and any other type of document); and (ii) respond in writing to specific questions.
Applications for court orders are made on an ex parte basis, meaning that the target of the order is typically not represented in court.
Q. Can these court orders require production of documents by people and affiliates located outside Canada (e.g., a foreign parent), even if the Canadian business does not have access to those documents?
Likely, yes. The PTA explicitly allows the court to make orders against persons and companies located outside Canada, although there is debate as to whether and how this provision can be enforced.
Q. Will companies be informed if a price gap inquiry is started? Will companies be informed in advance if the Commissioner intends to seek a court order?
Not necessarily. The Commissioner is not required to inform parties when an inquiry is started, or before seeking a court order. However, if a company knows or believes itself to be the subject of an inquiry, it may request (in writing) that the Commissioner provide an update on the status of the inquiry.
Q. Would the PTA allow the Commissioner to obtain a search warrant or carry out “dawn raids” regarding price gap concerns?
No. The Commissioner’s information-gathering powers are limited to court orders requiring the production of documents and/or written responses to questions. The Commissioner cannot obtain search warrants.
Q. Are inquiries public? What information will be available to the public?
In general, inquiries under the Competition Act must be conducted in private. Documents and information provided to the Commissioner are kept confidential, subject to three principal exceptions:
- If the Commissioner seeks and obtains a court order, all materials filed with the court are available to the public (unless sealed).
- The Commissioner may publicize information received in an inquiry “for the purposes of the administration or enforcement of the [Competition] Act”. The scope of this exception is not well defined, but the Commissioner has taken an expansive view in the past.
- The reports that the Commissioner prepares in connection with inquiries must be made publicly available (see below).
No documents or information provided to the Commissioner may be obtained through requests under the Access to Information Act.
Q. Will private litigants be able to obtain access to material collected by the Commissioner?
Maybe. A recent Supreme Court of Canada decision suggests that private litigants may, in some cases, be able to obtain evidence collected by the Commissioner as part of inquiries under the Competition Act. It is not clear whether and how this decision might apply to evidence collected in the course of a “price gap” inquiry.
Q. What about contracts that are subject to confidentiality or non-disclosure obligations?
If the Commissioner obtains a court order, contractual confidentiality or non-disclosure provisions do not permit a party to withhold (or redact) any documents.
PART 3: WHAT HAPPENS NEXT?
Q. What will the Commissioner do in an inquiry? What is the outcome of an inquiry?
The Commissioner will inquire into the difference in selling price, with a view to determining the facts, including the extent of the difference between the selling prices and the reasons for that difference. Then, he must issue a public report setting out his conclusions. The PTA requires the Commissioner to take all reasonable steps to complete the report within one year after he receives information he considers to be sufficient for the inquiry.
Q. Can I appeal the Commissioner’s findings, or do anything to prevent him from issuing a report that I consider incorrect?
No. The PTA does not provide for any appeal process, or any other participation by the companies whose products are the subject of the inquiry. As a matter of practice, the Commissioner will very likely be willing to hear from affected parties as part of his inquiry, but he is under no obligation to take their feedback into account when preparing his report.
Q. What if the Commissioner finds documents related to a potential offence that has nothing to do with a “price gap”?
With respect to businesses, any information obtained through a court order can be used as part of investigations (or prosecutions) under other provisions of the Competition Act, and can be shared with other Canadian government officials for investigations under other laws. However, any information provided by an individual cannot be used against him or her in criminal proceedings. In general, the Commissioner cannot share information with foreign officials, except with a company’s consent.
Q. Apart from the public report, is the Commissioner able to seek any other types of penalties (e.g., fines, court orders, etc.)?
No. The PTA only allows (and requires) the Commissioner to issue a report. No other penalties may be imposed.
Q. Is the Commissioner required to issue a report in connection with every price gap inquiry, even if the price difference is found to be justifiable?
Likely, yes. If, in the course of an inquiry, the Commissioner determines that a price difference is justifiable (or otherwise not objectionable), he may choose to discontinue the inquiry. The proposed law is not clear as to whether the Commissioner is required to issue a report even if an inquiry is discontinued, but it appears likely. If the Commissioner chooses not to discontinue the inquiry, he is required to issue a report.