GLOBAL COMPETITION REVIEW
in 37 jurisdictions worldwide Contributing editors: Thomas Janssens and Thomas Wessely
[10th anniversary] [edition]
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Getting the Deal Through is delighted to publish the fully revised and updated 10th anniversary edition of Dominance, a volume in our series of annual reports, which provide international analysis in key areas of law and policy for corporate counsel, cross- border legal practitioners and business people.
Following the format adopted throughout the series, the same key questions are answered by leading practitioners in each of the 37 jurisdictions featured.
Every effort has been made to ensure that matters of concern to readers are covered. However, specific legal advice should always be sought from experienced local advisers. Getting the Deal Through publications are updated annually in print.
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2 Getting the Deal through – Dominance 2014
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Other relevant provisions of the Act include section 75 (refusal to
deal), section 76 (resale price maintenance), section 77 (exclusive
What is the legislation applying specifically to the behaviour of dominant firms?
The Competition Act, RSC 1985, c C-34 (the Act), a federal statute, is the primary legislation applicable to the behaviour of dominant firms. Section 79 permits the Competition Tribunal, a special- purpose federal tribunal (the Tribunal), on application from the Commissioner of Competition (the Commissioner) – who heads the enforcement agency, the Competition Bureau (the Bureau) – to issue an order where it finds that:
A non-exhaustive list of anti-competitive acts appears in section 78, paragraph 1:
squeezing, by a vertically integrated supplier, of the margin available to an unintegrated customer who competes with the supplier, for the purpose of impeding or preventing the customer’s entry into, or expansion in, a market; acquisition by a supplier of a customer who would otherwise be available to a competitor of the supplier, or acquisition by a customer of a supplier who would otherwise be available to a competitor of the customer, for the purpose of impeding or preventing the competitor’s entry into, or eliminating the competitor from, a market; freight equalization on the plant of a competitor for the purpose of impeding or preventing the competitor’s entry into, or eliminating the competitor from, a market; use of fighting brands introduced selectively on a temporary basis to discipline or eliminate a competitor; pre-emption of scarce facilities or resources required by a competitor for the operation of a business, with the object of withholding the facilities or resources from a market; buying up of products to prevent the erosion of existing price levels; adoption of product specifications that are incompatible with products produced by any other person and are designed to prevent his entry into, or to eliminate him from, a market; requiring or inducing a supplier to sell only or primarily to certain customers, or to refrain from selling to a competitor, with the object of preventing a competitor’s entry into, or expansion in, a market; and selling articles at a price lower than the acquisition cost for the purpose of disciplining or eliminating a competitor.
dealing, tied selling and market restriction) and section 81 (delivered pricing).
Non-dominant to dominant firm
Does the law cover conduct through which a non-dominant company becomes dominant?
The Bureau has released enforcement guidelines on the abuse of dominance provisions (the Guidelines), which state that sections 78 and 79 are concerned not only with the enhancement, but also with the creation or entrenchment of market power by means of practising anti-competitive acts. The Bureau issued the current edition of the Guidelines in September 2012.
Object of legislation
Is the object of the legislation and the underlying standard a strictly economic one or does it protect other interests?
The Act contains a purpose clause in section 1.1, which includes several objects in addition to the encouragement of competition and promotion of efficiency. In particular, the Act is designed to expand opportunities for Canadian participation in world markets, recognise the role of foreign competition, ensure that small and medium-sized businesses can participate in the economy, and promote consumer welfare. Although the Bureau and the Tribunal had historically put the most emphasis on economic efficiency, in the merger case Canada (Commissioner of Competition) v Superior Propane Inc, the then-Commissioner argued that the other purposes must be given effect as well, and this argument was upheld at the Federal Court of Appeal. (Revisions to the Merger Enforcement Guidelines (MEGs) in 2004, maintained in the 2011 version, reflected this point of view.) As section 1.1 applies to the entire Act, these diverse purposes cover the abuse of dominance provisions as well. That said, the guidelines and the case law reflect a largely economic approach to Bureau enforcement, based on the need to prove that a substantial lessening or prevention of competition has been or is likely to be caused by the anti-competitive behaviour.
Are there any rules applying to the unilateral conduct of non-dominant firms? Is your national law relating to the unilateral conduct of firms stricter than article 102 TFEU?
Generally speaking, the answer is no. Section 79 specifically requires a finding of dominance. More specific provisions related to unilateral conduct (eg, exclusive dealing, tied selling and market restriction (section 77), and delivered pricing (section 81)) do not use the word ‘dominant’, but apply to the activities of ‘a major supplier’. This phrase has been interpreted by the Tribunal (in Canada (Director of
34 Getting the Deal Through – Dominance 2014
Investigation and Research, Competition Act) v NutraSweet Co) in a substantially similar way to dominance, in that a ‘major supplier’ is one ‘whose actions are taken to have an appreciable or significant impact on the markets where it sells’. Likewise, while the Act’s refusal to deal provision (section 75) and price maintenance provision (section 76) do not mention dominance, their requirement that the conduct have or be likely to have an ‘adverse effect on competition in a market’ makes some form of market power a precondition to their application. The March 2009 amendments to the Competition Act, among other things, revoked the criminal pricing provisions (formerly, sections 50, 51 and 61), thus making the formerly per se criminal predatory pricing, price discrimination and resale price maintenance amenable to sanction only if undertaken by a firm with some form of market power. On 16 October 2013, the Governor General’s Throne Speech announced the intention of the government to take measures to prevent the charging of higher prices in Canada than in the United States. Exactly how this would be accomplished, however, remains to be seen, although one possible approach would be to amend section 79 to declare exploitative pricing by a dominant firm to constitute an ‘abuse’ if its pricing is higher in Canada than in the United States.
Although not strictly matters of competition law, the Act also contains both criminal and civil provisions addressing unilateral conduct in the form of deceptive advertising and telemarketing practices, none of which is tied to dominance. In 2009, the Bureau confirmed its enforcement approach in new guidelines relating to cases of deceptive advertising for ‘made in Canada’ and ‘product of Canada’ claims.
intention to substitute competition law enforcement with a different regulatory regime, replete with a regulator exercising sufficient authority to proceed contrary to the Act. In the absence of legislative conflict or permission, however, sector-specific legislation and the Act are complementary.
7 Enforcement record
How frequently is the legislation used in practice?
Abuse of dominance matters have come before the Tribunal infrequently: since the Act was enacted in 1986, only 14 cases have been brought before the Tribunal (of which five were contested proceedings (as described below, one of these, the TREB case, has been dismissed by the Tribunal, but is currently being appealed by the Commissioner), five resulted in consent orders, one was settled by consent order following an appeal after the Tribunal’s ruling, one was settled after a partial decision, and two are ongoing contested proceedings). Nevertheless, the Bureau’s recent annual reports reveal that it investigates approximately six to nine civil matters (including abuse cases) per year. The Bureau is arguably not as proactive as its European counterparts, perhaps due, in part, to a former lack of monetary penalties (until recently; see question 34), but also due to the arguably more stringent approach in Canada to proof of an anti-competitive effect.
The legislation’s practical effect is difficult to gauge, although it presumably discourages the most blatant abuses of dominance. Notably, the Act makes no provision for the award of damages and provides only limited scope for private parties to seek behavioural orders from the Tribunal, thus limiting the practical effect of the law.
That said, Bill C-10 was enacted in March 2009, implementing the
Is dominance regulated according to sector?
Provisions seeking to control abusive behaviour by dominant domestic airlines were repealed in March 2009. Administrative monetary penalties (AMPs), which had previously applied solely to domestic airlines, specific provisions in respect of which have now been repealed (as discussed in further detail in question 34), now apply to all sectors of the economy.
Certain federal sectors with their own regulators and statutes are subject to unilateral conduct provisions under statutes other than the Competition Act. For instance, the Telecommunications Act forbids the granting of ‘an undue or unreasonable preference’ by a common carrier to any entity, including itself. The National Energy Board Act, meanwhile, proscribes pipeline companies’ ‘discrimination in tolls, service or facilities against any person or locality’. The Canada Transportation Act contains similar provisions with respect to certain transport services.
Certain business activities fall under the jurisdiction of the provinces where they occur, and these too often have regulating mechanisms for unilateral conduct. For instance, the various empowering laws of the Ontario Energy Board mandate that body to ensure fair competition and non-discriminatory access in the province’s energy markets.
Status of sector-specific provisions
What is the relationship between the sector-specific provisions and the general abuse of dominance legislation?
The Bureau presumes the abuse of dominance provisions to apply to all businesses unless the activity in question is mandated or authorised pursuant to other valid legislation. The Bureau acknowledges the existence of a judge-made ‘regulated conduct doctrine’, which may serve as a justification for actions reviewable under the Act, and in 2010 released an updated technical bulletin on ‘regulated’ conduct. Among other things, this bulletin provides that when presented with two apparently conflicting laws, the Bureau would not pursue a matter where there was evidence of a legislative
most significant amendments to the Act since 1986. The amendments broadened both the breadth of practices to be addressed under section 79 and the remedies available in respect of breaches thereof. The breadth of section 79 was extended, in effect, by repeal of the criminal provisions for predatory pricing, price discrimination and promotional allowances, leaving such practices to be dealt with exclusively as an abuse of dominance (although such conduct already had the potential to be addressed under section 79).
As for remedies, AMPs may be ordered by the Tribunal for abuse of dominance in amounts up to C$10 million for a first order and up to C$15 million for each subsequent order. Whether the expanded scope and remedies under section 79 will result in a continuing increase in the number of abuse of dominance cases being brought before the Tribunal, or more consensual remedies, remains to be seen; however, an increased pace in Tribunal applications under the ‘abuse’ provisions is reflective of an increased vigour in enforcement of the Act generally since the 2009 amendments. In addition to three cases currently ongoing before the Tribunal and the courts, described below, the Bureau announced in the summer of 2009 that two waste companies had consented to rewrite their contracts for commercial waste disposal services. In 2010, a case against the Canadian Real Estate Association (CREA) settled after the association agreed to loosen the rules applicable to the use of its trademarked Multiple Listing Service (MLS).
Following the CREA resolution, the Bureau filed an application with the Tribunal on 27 May 2011 under section 79(1) and (2) of the Act against the Toronto Real Estate Board (TREB), in which it alleged that TREB’s control over the MLS system was being exercised in such a way that it was having an exclusionary and restrictive effect on real estate brokers’ access to and use of the TREB MLS system. The restrictions, it was alleged, limit brokers’ ability to use new and innovative business models and service offerings. TREB, in its reply to the Commissioner’s application, argued that it was exercising a legitimate proprietary right in its copyrighted database and hence its conduct fell under the exception found in section 79(5) of the Competition Act. This section provides that the exercise of any right or enjoyment of any interest under various intellectual
property statutes is not an anti-competitive act. In its decision of 15 April 2013, the Tribunal concluded that the abuse of dominance provisions did not apply to TREB’s actions because TREB did not compete with its members. In order for anti-competitive conduct to be caught by section 79, the conduct must have had a negative effect on a competitor that is predatory, exclusionary or disciplinary. As a result, section 79 did not apply. On 14 May 2013, the Commissioner filed a notice of appeal with the Federal Court of Appeal and on 23 October 2013 the file was ready to be set down for trial. At the time of writing the hearing date and place have not yet been confirmed.
On 20 December 2012, the Commissioner filed two separate applications with the Tribunal under subsection 79(1), (2) and (3.1) of the Act, against Reliance Comfort Limited Partnership (Reliance) and Direct Energy Marketing Ltd (Direct Energy). The Commissioner alleges that Reliance and Direct Energy have abused and continue to abuse their dominant position in the supply of natural gas, electric water heaters and related services to residential consumers in Ontario, and that both companies’ water heater return policies and procedures are aimed at preventing consumers from switching to competitors, thereby constituting anti-competitive acts and excluding competition. Both cases are presently before the Tribunal and hearing dates had not yet been set at the time of writing. On 6 November 2013, the Tribunal issued an order granting the National Energy Corporation leave to intervene in both cases.
What is the role of economics in the application of dominance provisions?
Economics play a central role in analyses under section 79, and expert economists are used as a matter of course in investigations and proceedings, as proof of a ‘substantial lessening or prevention of competition in a market’ is largely economic.
Scope of application of dominance provisions
To whom do the dominance provisions apply? To what extent do they apply to public entities?
The entire Act is one of general application to the Canadian marketplace, and section 2.1 explicitly applies the Act to competitive activities of public entities ‘to the extent that it would apply if the agent were not an agent of Her Majesty’. As noted in question 7, above, the Tribunal’s recent decision in the TREB hearing (currently under appeal) establishes that in order for anti-competitive conduct to be caught under section 79, the conduct must have a negative effect that is predatory, exclusionary or disciplinary on a competitor. This holding firmly rejects the position taken by the Bureau in its 2012 Guidelines that certain acts not specifically directed at competitors could still be considered to have an anti-competitive purpose.
Definition of dominance
How is dominance defined?
of market power as ‘the ability to behave relatively independently of the market’. The guidelines state that the Bureau, in analysing dominance, will consider a number of qualitative and quantitative factors in an effort to determine the ‘extent to which a firm or group of firms is constrained from raising prices owing to the presence of effective competition or the likelihood of competitive entry’.
What is the test for market definition?
Both product and geographic markets are generally defined for each individual case that the Bureau examines; there is no predetermined reference point for any given product. The 2012 guidelines articulate the Bureau’s approach to defining the relevant antitrust market. While the hypothetical monopolist test was expressly rejected in earlier guidelines as being inappropriate for use in abuse cases, noting that ‘the issue relates to an existing situation rather than an assessment of a prospective situation, as in a merger’, the 2012 guidelines specifically embrace the use of the hypothetical monopolist test, albeit not necessarily with regard to the current price level, as that price may already reflect the results of the anti-competitive conduct in question (the Cellophane Fallacy).
According to the guidelines:
The smallest candidate [product] market considered is the allegedly abusive firm’s product. If a hypothetical monopolist controlling that product would not impose a small but significant and non- transitory price increase above the benchmark, assuming the terms of sale of all other products remained constant, the candidate market is expanded to include the next-best substitute. The next- best substitute could include the products of firms that continue to sell in the presence of the alleged anti-competitive act, as well as the products of firms that have been identified as likely to have been excluded. The analysis is repeated until the point at which the hypothetical monopolist would profitably impose and sustain such a price increase over the set of candidate products … In general, the smallest set of products in which the price increase would be sustained is defined as the relevant product market.
The guidelines indicate that, although direct evidence of buyer substitution in response to price changes is ideal, the Bureau also considers qualitative evidence such as the nature of the buyers, characteristics of the product, switching costs, and price relationships between products over time. Consistent with the MEGs, the abuse guidelines now also make it clear that only buyer substitution responses will be considered relevant to the definition of a relevant antitrust market, the role of potential supply responses being confined to assessing the potential for market power.
The task of defining a relevant geographic market is undertaken in largely the same manner. The Bureau examines the dimensions of buyer switching, by location, in response to a SSNIP, applying the hypothetical monopolist test as described above. The Bureau also considers several qualitative factors: the nature of the buyers, switching costs, transport costs and foreign competition.
According to the 2012 guidelines, dominance is seen as synonymous
with market power, as indicated by ‘the ability to profitably maintain prices above the competitive level (or similarly restrict non price dimensions of competition) […] for a significant period of time’. The guidelines also clarify that market power can ‘arise on the buying side when a single firm or group of firms has the ability to profitably depress prices paid to sellers to a level that is below the competitive price for a significant period of time’. Generally, a 5 per cent real price increase above the price level that would prevail in the absence of the anti-competitive acts, sustained for one year, is considered to meet this definition (although non-price aspects of competition are also considered). In R v Nova Scotia Pharmaceutical Society, the Supreme Court of Canada also provided a definition
Is there a market-share threshold above which a company will be presumed to be dominant?
In the Laidlaw case, the Tribunal ruled that a 50 per cent market share would lead to a prima facie presumption of dominance, but that a share below this mark did not constitute a ‘safe harbour’ from scrutiny, which the guidelines place at 35 per cent for a unilateral actor. In practice, all litigated cases have involved shares well in excess of 50 per cent. The guidelines state that joint dominance is unlikely to be found at less than a combined market share of 65 per cent. The Tribunal has not considered a contested joint dominance case.
36 Getting the Deal Through – Dominance 2014
13 Collective dominance
Abuse in general
Is collective dominance covered by the legislation? If so, how is it
One of the conditions for a Tribunal order under section 79 is that ‘one or more persons substantially or completely control, throughout Canada or any area thereof, a class or species of business’. The inclusion of ‘one or more’ clearly allows for collective dominance, and the Bureau has stated in the guidelines that a combined market share of 65 per cent will prompt further investigation from the Bureau as to the possibility of coordinated, anti-competitive action, where multiple actors are involved (such actions falling short of an ‘agreement’, as agreements are dealt with under either the criminal prohibition of section 45, which makes it illegal for competitors to fix prices; allocate sales, territories, customers or markets; fix, maintain, control, prevent, lessen or eliminate the production or supply of a product; or the new civil provision (section 90.1) under which the Tribunal is given the power to deal with anti-competitive agreements that do not fall under the criminal prohibition or that are subject to the ‘ancillary and necessary’ defence applicable to section 45).
Although no contested joint dominance cases have been decided by the Tribunal, two have been resolved consensually. The Interac Association agreed to the issuance of an order by the Tribunal on consent in 1995, requiring the founding financial institution members to loosen rules for participating in Canada’s ubiquitous point-of-sale debit card and electronic banking machine system (see Canada (Director of Investigation and Research) v Bank of Montreal). See also Canada (Director of Investigation and Research) v GT Director Ltd et al; and The Commissioner of Competition and Waste Services (CA) Inc and Waste Management of Canada Corporation in which, as mentioned above, the Bureau announced in June 2009 that it had reached an agreement with Waste Services (CA) Inc and Waste Management of Canada Corporation to stop abusing their jointly dominant position in commercial waste collection services in central Vancouver Island. According to the Bureau, the two firms had been foreclosing competition by using long-term contracts that locked in customers and included similar, and highly restrictive, terms such as automatic renewal clauses, liquidated damages (significant penalties for early termination) and rights of first refusal. The two companies agreed to rewrite their contracts under a consent agreement with a term of seven years.
How is abuse defined? Does your law follow an effects-based or a form-based approach to identifying anti-competitive conduct?
By the letter of the law in Canada, abuse of dominance can only be proscribed in the context of a negative effect on competition, in that there is no per se prohibited conduct for a dominant firm. That said, the Tribunal has endorsed the view in several cases that an act is ‘anti-competitive’ if its ‘overall character’ and intent is ‘exclusionary, predatory or disciplinary’ with regard to competitors (for example, by raising rivals’ costs, or contractually limiting access to customers). Indeed, the Commissioner’s factum in her appeal of Commissioner of Competition v Canada Pipe Company Ltd did break new ground in suggesting that certain conduct can be deemed exclusionary by its very nature, in a sense advocating the existence of a form-based definition of some anti-competitive acts. In addition, the Tribunal’s recent decision in TREB (currently under appeal; see question 7) establishes that in order for anti-competitive conduct to be caught under section 79, the conduct must have a negative effect that is predatory, exclusionary or disciplinary on a competitor. This decision rejects a position asserted by the Bureau in its 2012 guidelines that certain acts not specifically directed at competitors could still be considered to have an anti-competitive purpose. In any event, no order will be issued under section 79 unless the practice of anti-competitive acts is found to have caused or be likely to cause a substantial lessening or prevention of competition. Thus, there can be no per se prohibited conduct under the abuse provisions, even for dominant firms.
Exploitative and exclusionary practices
Does the concept of abuse cover both exploitative and exclusionary practices?
There is no concept of ‘exploitative pricing’ in the Act. The 2012 Guidelines state clearly that charging higher prices to customers, or offering lower levels of service than would otherwise be expected in a more competitive market, will not alone constitute abuse of a dominant position.
Rather, the enumerated anti-competitive acts listed in section 78 largely fit under the ‘exclusionary’ concept in European terms. Although this list is not exhaustive, and certainly the Tribunal has
deemed conduct anti-competitive even where it does not clearly fall
14 Dominant purchasers
Does the legislation also apply to dominant purchasers? If so, are there any differences compared with the application of the law to dominant suppliers?
The Commissioner has never prosecuted a case on the basis of monopsony or oligopsony (the purchaser’s equivalent to monopoly and oligopoly) alone. However, the market power of buyers has surfaced in matters of merger control and in at least one abuse of dominance case. In Director of Investigation and Research v D&B Companies of Canada Ltd (better known as the AC Nielsen case), a firm’s dominance of both upstream and downstream markets was considered, although ultimately only the downstream analysis proved relevant to the outcome. Also, the Bureau’s 2011 MEGs contain a discussion of monopsony power among buyer groups as well as the use of a ‘hypothetical monopsonist test’ for market definition in cases where buyer power is a concern. Generally speaking, the Bureau will find that buying power constitutes an anti- competitive effect where a merged buyer can reduce the price of an upstream input by reducing the quantity of input that it purchases. The abuse guidelines refer to the discussion of monopsony in the MEGs, confirming that this approach will apply to monopsonistic activities in the abuse of dominance context.
under one of the enumerated paragraphs of section 78, a suggestion in the 2012 guidelines (citing the Canada Pipe decision) that, while the Tribunal generally tests for anti-competitive purpose by asking whether an act is done for a ‘predatory, exclusionary or disciplinary reason’ against a competitor, ‘certain acts not specifically directed at competitors could still be considered to have an anti-competitive purpose’ was firmly rejected by the Tribunal in the above-mentioned TREB decision (see question 7). Whether the Federal Court of Appeal will take a different position on this issue remains to be seen. Despite the TREB finding, however, it remains clear that all factors, including evidence of subjective intent as well as the foreseeable results of the conduct and any relevant business justification, may be considered. The Federal Court of Appeal confirmed the view that section 79 covers only exclusionary conduct in the Canada Pipe case, despite the presence of paragraph 78(f), which defines the ‘buying up of products to prevent the erosion of existing price levels’ (an act that is not exclusionary, but exploitative) as an anti- competitive act. The guidelines contain extensive discussion of both exclusionary and predatory abuses.
Link between dominance and abuse
What link must be shown between dominance and abuse?
As noted above (see question 1), three elements must be proved: dominance, a practice of anti-competitive acts, and a substantial lessening or prevention of competition. The need for a causal link between anti-competitive conduct and a substantial lessening or prevention of competition was underscored at the Federal Court of Appeal in the Canada Pipe case, where the court accepted that in analysing the effect of allegedly abusive conduct, the relevant comparison is what the state of competition in a market would be or would have been in the presence and in the absence of the conduct in question.
According to the Guidelines, in analysing a potential substantial lessening or prevention of competition, ‘the Bureau’s general approach is to ask whether, but for the practice in question, there would likely be substantially greater competition in the market in the past, present, or future’.
That said, the anti-competitive effects need not be felt in the same market as that in which the firm is dominant. The tied selling provision of the Act, in section 77, is an example where conduct in one market can be reviewable owing to a substantial lessening of competition in a different market (although it should be noted that the effect on the adjacent market must be significant enough to create, preserve or enhance market power in the affected market).
What defences may be raised to allegations of abuse of dominance? Is it possible to invoke efficiency gains?
Subsection 79(4) of the Act requires the Tribunal to consider whether the effect on competition is the result of ‘superior competitive performance’.
The guidelines state that:
A business justification is not a defence to an allegation that a firm has engaged in anti-competitive conduct, but rather an alternative explanation for the overriding purpose of that conduct, if and as required, that a firm can put forward where the Bureau believes that purpose to be anti-competitive.
The Tribunal considers mitigating circumstances to allegedly anti- competitive conduct. To the extent that a firm has a valid reason for engaging in potentially exclusionary or predatory conduct, however, the Bureau will consider this not as a defence, but will consider it in the context of determining whether the overall purpose of the conduct is anti-competitive. The Federal Court of Appeal ruled in Canada Pipe that ‘a business justification must be a credible efficiency or pro-competitive rationale for the conduct in question, which relates to and counterbalances the anti-competitive effects and/or subjective intent of the acts’. The guidelines state the Bureau’s view that, generally speaking, a credible efficiency or pro- competitive rationale ‘could include, for example, reducing the firm’s costs of production or operation, or improvements in technology or production processes that result in innovative new products or improvements in product quality or service’. The Tribunal noted in the case of the AC Nielsen case that neither pure self-interest nor retaining or obtaining a dominant position in order to guard against another firm doing the same, would disprove anti-competitive intent.
In addition, conduct engaged in pursuant only to the exercise of a right or interest derived under Canada’s intellectual and industrial property (IP) statutes is not an anti-competitive act (that said, the choice of licensee and the terms of a licence are not deemed to constitute the mere exercise of IP rights, and actions such as a refusal to license, which do fall squarely under the heading of the mere exercise of IP rights, can nonetheless be challenged under section 32 of the Competition Act). In the TREB case (see
question 7) the Toronto Real Estate Board, as part of its defence to the Commissioner’s allegations of abuse of dominance, relied on section 79(5) of the Act, which states that an exercise of any right or enjoyment of any interest derived under Canada’s IP statutes does not constitute an anti-competitive act. In effect, TREB’s defence was that its limits on the use of data associated with the Multiple Listing Service were legitimate exercises of its copyright in a proprietary database. In its 15 April 2013 decision (see question 7), the Tribunal concluded that the abuse of dominance provisions did not apply to TREB’s actions because TREB did not compete with its members and, as such, did not address TREB’s proposed defence. This decision is currently under appeal, although a hearing date has not yet been set at the time of writing.
Specific forms of abuse
Price and non-price discrimination
As a result of the 2009 amendments, the criminal offence of price discrimination (formerly in section 50 of the Act) was repealed, leaving such conduct to be addressed exclusively under section 79, the civil abuse of dominance provision. Under the Act’s price maintenance provision (section 76), which was converted from a criminal offence to a civilly reviewable practice by the 2009 amendments, the Tribunal, on application by the Commissioner, may prohibit a person from discriminating against another person due to the latter’s low pricing policy or order the supplier to accept the person as a customer, if the discrimination is having or is likely to have an adverse effect on competition. The Tribunal may also grant leave under section 76 to a private party to bring an application before the Tribunal if there is reason to believe that the applicant is directly affected by the allegedly discriminatory conduct. In addition to the non-discrimination provisions in some of the sector- specific areas addressed in question 5, it is also worth noting that the Bureau’s ‘Information Bulletin on the Abuse of Dominance Provisions as Applied to the Telecommunications Industry’, released in 2008 (now archived), states that the Bureau will investigate claims of discriminatory access to non-regulated telecommunications facilities.
The Commissioner filed her first case under the newly civil price maintenance provisions against Visa and MasterCard on 15 December 2010. In this application, the Commissioner alleged that Visa and MasterCard restrained competition in the market for credit card network services by imposing restrictions on merchants that limit their ability to decline certain credit cards with higher acceptance fees. The Commissioner sought an order under sec- tion 76 prohibiting the credit card companies from entering into, enforcing or continuing agreements or arrangements that influ- ence upward or discourage the reduction of the Card Acceptance Fees. Both the Toronto Dominion Bank and the Canadian Bankers’ Association were granted leave to intervene in this case. On 23 July 2013, while acknowledging that Visa and MasterCard’s conduct is influencing the price of credit card services in Canada upwards and having an adverse effect on competition, the Tribunal dismissed the Commissioner’s case, holding that section 76 of the Act requires a ‘resale’, and that the Commissioner had not established that Visa and MasterCard’s customers resell Visa and MasterCard’s prod- ucts. The Tribunal also held, in the alternative, that even if section 76 did apply it would not have issued an order, finding regulation to be the preferable and more effective alternative. On 30 September 2013, the Commissioner announced that he would not appeal the Tribunal’s decision, but that the Bureau would focus its efforts on identifying alternative means of addressing the competition issues in the supply of credit card services in Canada.
In addition, on 19 September 2013, Safa Enterprises Inc (SEI) filed an application with the Tribunal under section 76 of the Act seeking leave to bring an application for an order prohibiting Imperial Tobacco Company Limited (Imperial) from discriminating
38 Getting the Deal Through – Dominance 2014
against SEI by means of a low pricing policy awarded to SEI’s direct competitor, New Hasty Markets (NHM), and requiring Imperial to accept SEI on the same discounted trade terms as NHM. SEI’s appli- cation is presently before the Tribunal.
Exploitative prices or terms of supply
The Act has no exploitative pricing provisions such as exist in Europe. The Act covers only complete refusals to supply in certain circumstances, rather than agreements to supply under exploitative terms (see question 24). However, see question 19 regarding discrimination and question 23 regarding price squeezes. As noted above (see question 4), on 16 October 2013, the Governor General’s Throne Speech announced the intention of the government to take measures to prevent the charging of higher prices in Canada than in the United States. Exactly how this is to be accomplished remains to be seen, although one possible approach would be to amend section 79 to declare exploitative pricing by a dominant firm to constitute an ‘abuse’, if its pricing is higher in Canada than in the United States.
Rebates are not addressed explicitly in the Act, although if a rebate scheme could be characterised as inducing a customer to purchase only specific products designated by the supplier, then it can be reviewed as an abuse of dominance (section 79) or as an example of exclusive dealing (section 77), or both. Rebate schemes will generally be analysed under the general rubric of ‘predatory pricing’, as one method by which prices may be reduced below cost (see question 22), although tying concerns may also arise.
‘[S]elling articles at a price lower than the acquisition cost for the purpose of disciplining or eliminating a competitor’ is one of the enumerated examples of anti-competitive acts listed in section 78 of the Act. The Bureau’s guidelines on predatory pricing (now archived), as well as the abuse guidelines, espouse the ‘avoidable cost’ standard for unreasonably low pricing (prices lower than the costs that would have been avoided by not selling the product or service in question during the time the price was in effect), and make it clear that both a price-cost screen and recoupment are applied by the Bureau, in order to avoid dulling legitimate price competition. The avoidable cost standard has yet to be adopted by the Tribunal.
Predatory pricing, which was previously criminally actionable conduct, is now only civilly reviewable as part of a ‘practice of anti- competitive acts’ under the abuse of dominance provisions found in Part VIII of the Act. Predatory pricing is reviewable only if it prevents or lessens competition substantially.
One of the enumerated anti-competitive acts in section 78 of the Act is ‘squeezing, by a vertically integrated supplier, of the margin available to an unintegrated customer who competes with the supplier, for the purpose of impeding or preventing the customer’s entry into, or expansion in, a market’. The guidelines treat price squeezes like other exclusionary conduct. The guidelines state that, in general, ‘the Bureau is not concerned with conduct that forces competitors to be more effective, but rather with conduct that makes it more difficult for competitors to be effective’.
Refusals to deal and access to essential facilities
Refusal to supply a customer when insufficient competition exists in a market and certain other preconditions are met, is reviewable under section 75 of the Act on application by the Commissioner (rare) or, with leave, private parties. For the Tribunal to order the resumption of supply, the complainant must be unable to obtain
an adequate supply anywhere in a market, owing to a lack of competition, despite being willing and able to pay on usual trade terms and the product being in ample supply. The complainant must also be substantially affected in its overall business, and the refusal must have an adverse effect on competition. Of note, refusal to supply on the basis of a person’s low pricing policy is a civilly reviewable practice under section 76 (price maintenance), even if only one of the reasons for refusing supply is the customer’s low pricing policy. Two recent decisions highlight the need, under refusal to deal cases, of proving anti-competitive effects. On 4 March 2011, the Competition Tribunal released a decision in Brandon Gray Internet Services Inc v Canadian Internet Registration Authority in which it denied Brandon Gray’s application under section 103.1 of the Act, alleging refusal to deal (see question 36). In the case, Brandon Gray, an internet domain name registrar, had been refused re-certification of its domain name by the Canadian Internet Registration Authority. The Tribunal denied Brandon Gray’s application on the basis that it had not shown that the alleged refusal to deal was likely to have an adverse effect on competition in the market. Similar arguments have been made by the Insurance Bureau of Canada (IBC) in response to an application by the Used Car Dealer’s Association of Ontario. In that case, however, the Tribunal rejected IBC’s argument and granted leave for the Used Car Dealer’s Association to bring an application for refusal to deal under section 75 of the Act. The Used Car Dealer’s Association of Ontario withdrew its subsequent section 75 application on 22 January 2013, having settled its dispute with IBC.
The ‘pre-emption of scarce facilities or resources required by a competitor for the operation of a business, with the object of with- holding the facilities or resources from a market’ is an enumerated class of anti-competitive act in section 78. Furthermore, the Bureau’s ‘Information Bulletin on the Abuse of Dominance provisions as applied to the Telecommunications Industry’ (now archived) dis- cusses the provision of essential facilities, noting that denying access to non-regulated facilities is an example of market foreclosure.
Exclusive dealing, non-compete provisions and single branding Exclusive dealing by a major supplier is reviewable by the Tribunal on application by the Commissioner or, with leave, a private party, where it causes or is likely to cause a substantial anti-competitive effect in a market. It has also been found to constitute part of a practice of anti-competitive acts in several abuse cases such as NutraSweet and Canada Pipe.
In the Laidlaw case, the Tribunal condemned as anti-competitive
a number of Laidlaw’s contractual practices in acquisition agreements, including lengthy non-competition covenants. Such agreements also hold the potential to attract criminal sanctions under section 45 of the Act (conspiracy) if they can be construed as agreements to allocate sales, territories, customers or markets; or to fix, maintain, control, prevent, lessen or eliminate the production or supply of a product that are not ‘ancillary and necessary’ to the main purchase contract (although the Commissioner has publicly stated several times that non-competition covenants that are not mere shams for cartel behaviour will be examined under the new civil section 90.1 to determine if they are likely to substantially lessen or prevent competition). Indeed, in the TREB case, despite dismissing the Commissioner’s application under section 79, the Tribunal stated in its reasons that section 91 might give the Commissioner a means to apply to the Tribunal to seek an order prohibiting the members of TREB’s board of directors (who are competitors) from enforcing the restrictions. On 14 May 2013, the Bureau filed an appeal of the Tribunal’s decision with the Federal Court of Appeal, but no hearing date has been set at the time of writing.
Although the European term ‘single branding’ is not part of Canadian competition nomenclature, the Act does include in its definition of tied selling (see question 26) any practice whereby
a seller requires or induces a customer to ‘refrain from using or distributing, in conjunction with the tying product, another product that is not of a brand or manufacture designated by the supplier or the nominee’. Moreover, in the NutraSweet case, the Tribunal stated that both the clauses reflecting agreement to deal only or primarily in NutraSweet brand aspartame and the financial inducements to do so, impede ‘toehold entry’ into the market.
Tying and leveraging
Tied selling is reviewable under section 77 of the Act. Tied selling is defined in section 77 as any practice whereby a seller requires or induces a customer to ‘acquire any other product from the supplier or the supplier’s nominee’ or ‘refrain from using or distributing, in conjunction with the tying product, another product that is not of a brand or manufacture designated by the supplier or the nominee’. It may be prohibited by the Tribunal, on application by the Commissioner or, with leave, a private party if it is engaged in by a major supplier or is widespread in an industry and has resulted in or is likely to result in a substantial lessening of competition. Tied selling can also form part of a practice of anti-competitive acts for purposes of an abuse of dominance case by the Commissioner under section 79 of the Act. In its 2010 application against the Canadian Real Estate Association (CREA), the Bureau alleged that the minimum service obligations imposed on brokers for access to the trademarked Multiple Listing Service (MLS), through which the vast majority of homes in Canada are sold, substantially lessened and prevented competition to full-service brokers from emerging. The case settled before being heard by the Tribunal.
Limiting production, markets or technical development Agreements between competitors to limit production, or allocate customers or markets were made, effective from March 2010, per se criminally illegal under section 45 of the Act (ie, the Crown does not need to prove anti-competitive effect). If parties to such an agreement can prove the agreement was ‘ancillary and necessary’ to a broader or different agreement that is not proscribed under the new section 45, then the agreement may nonetheless be challenged under the new civil section 90.1, applicable to agreements that substantially lessen or prevent competition. The new section 90.1 is also applicable to agreements to limit technical development. Unilateral behaviour of a dominant firm (or independent yet coordinated conduct of jointly dominant firms) that limits production, markets or technical development could still be actionable under the civil abuse of dominance provisions of sections 78 and 79 of the Act, but only if it can be shown to be anti-competitive, and to be likely to substantially to lessen or prevent competition in a market.
Abuse of intellectual property rights
Under section 32 of the Act, where holders of exclusive intellectual and industrial property (IP) rights use those rights for four enumerated purposes, including an undue prevention or lessening of competition, the Federal Court may make certain remedial orders, including to void or limit a licence or other arrangement, to direct the granting of a licence, or even to amend or expunge a trademark from the register.
Moreover, while section 79(5) of the Act provides that ‘an act engaged in pursuant only to the exercise of any right or enjoyment of any interest’ derived under an IP statute is deemed not to be anti- competitive; the word ‘only’ has been given full effect to ensure that IP rights are not abused. The Bureau’s intellectual property enforcement guidelines (IPEGs) confirm that the ‘simple’ exercise of an IP right cannot be abusive under the Act, but that uses of such a right that do not stem strictly from the relevant IP statutes – such as when ‘IP rights form the basis of arrangements between independent entities, whether in the form of a transfer, licensing arrangement or
agreement to use or enforce IP rights’ – are subject to the general provisions of the Act.
Judicial interpretation has also leaned toward a heavy constraint on the application of the section 79(5) exemption for abuse of IP rights. As the licensing of an IP right arguably stems from statute – for example, the Patent Act explicitly provides for the licensing of a patent – one could conceivably argue that the IPEGs are overly ambitious in purporting not to exempt licensing arrangements. However, the Federal Court of Appeal in Eli Lilly and Co v Apotex Inc, ruled that a notionally similar exemption did not apply to a licensing arrangement deemed to be a conspiracy under the Act, as the Patent Act merely authorises, rather than compels, the assignment of a patent. Accordingly, for all but the unilateral exercise of the exclusive right to work a patent, to reproduce copyrighted works, or to use a trademark (eg, refusal to license), anti-competitive acts involving IP rights can be actionable under the abuse of dominance provisions of the Act. The terms attached to licences to use its trademarked Multiple Listing Service by the Canadian Real Estate Association, for example, were challenged by the Commissioner under the abuse of dominance provisions in 2010 (settled on consent) (see question 26). Similarly, in the TREB case discussed in question 7 (dismissed by the Tribunal, but currently under appeal at the Federal Court of Appeal), the Commissioner challenged the use of access provisions set up by TREB, notwithstanding the claim by TREB that it is merely exercising its intellectual property rights under the Copyright Act. Given its finding that section 79 did not apply to the facts of the case, the Tribunal did not comment on TREB’s intellectual property rights claim.
Abuse of government process
Abuse of government process does not factor explicitly into the Act; however, in the Laidlaw case, the Tribunal condemned Laidlaw’s use and threatened use of groundless litigation as predatory, and an ‘oppressive use of the legal system’. As regards patent claims, given that the IPEGs (see question 28) take care not to extend the protective umbrella of IP rights any broader than it need be, the Bureau could similarly frown upon an overuse of IP-related litigation, even though the underlying rights are derived from IP statutes. Legitimate anti- dumping cases may proceed, however, as may legitimate patent claims and other cases, even though the effect may be the substantial lessening or prevention of competition.
There are also mechanisms that indirectly prevent abuse of process, thanks to the interaction of the Bureau with other regulatory regimes. For instance, anti-dumping cases must first pass through preliminary inquiries by both the Canadian International Trade Tribunal and the Canada Border Services Agency, to ensure the record reveals a legitimate basis for proceeding. Moreover, the Commissioner has a statutory right under section 125 of the Act to intervene in proceedings before any federal ‘board, commission or other tribunal in respect of competition, whenever such representations are, or evidence is, relevant to a matter before’ such body, and may seek leave under section 126 to participate before provincial regulatory bodies in the same manner.
‘Structural abuses’ – mergers and acquisitions as exclusionary practices
Although merger approval is dealt with under a different part of
the Act, the Tribunal did deal with a situation where acquisitions themselves formed part of the practice of anti-competitive acts in the Laidlaw case. The Tribunal found that Laidlaw’s practice of buying up competitors was ‘clearly’ anti-competitive, and issued an order prohibiting the company, among other things, from acquiring any competitor for a period of three years.
40 Getting the Deal Through – Dominance 2014
Other types of abuse
Given the non-exhaustive nature of the examples of anti-competitive acts listed in section 78 and the ‘predatory, exclusionary or disciplinary’ categories of abuse offered by the NutraSweet case and confirmed in Canada Pipe, virtually any conduct engaged in by a dominant firm that is intended to harm rivals, increase their costs, raise barriers to entry, or otherwise prevent markets from functioning is potentially reviewable under the Canadian abuse of dominance provision.
Prohibition of abusive practices
Is there a directly applicable prohibition of abusive practices or does the law only empower the regulatory authorities to take remedial actions against companies abusing their dominant position?
Reference is often made in Canadian competition law to the ‘reviewable practice’ provisions, including those related to abuse of dominance, refusal to deal, tied selling, exclusive dealing, price maintenance and market restriction, because conduct falling into these categories is not prohibited, but may be reviewed by the Tribunal and prohibited only if such conduct is found to have the requisite anti-competitive effect. Potentially abusive practices are not prohibited, as such, but may be reviewed to determine whether in fact they do or are likely to lessen or prevent competition substantially.
Which authorities are responsible for enforcement and what powers of investigation do they have?
The Commissioner heads the Bureau, and is responsible for the administration and enforcement of the Act. The Commissioner can, on his or her own initiative, where he or she believes that grounds exist for the making of an order under section 79, or on application by any six adult residents in Canada, commence an inquiry into an alleged abuse of dominance. As part of this process, he or she can make an ex parte application to a judge for an order to subpoena those likely to have relevant information, or to have them produce documentation, or for a search warrant.
If the Commissioner finds evidence of an abuse of dominance, he or she will normally attempt to resolve the issue directly with the party or parties under investigation. When a consensual arrangement cannot be reached, however, he or she can apply to the Tribunal for a remedial order that may be behavioural or structural, and that may now include fines (see question 34).
of any such order should be remedial, not punitive. To date, no such fines have been levied under the ‘abuse’ provisions; however, in two cases currently in progress before the Tribunal, the Commissioner is seeking AMPs for an alleged abuse of dominance for the first time, notably at the maximum amount statutorily available, against Direct Energy and Reliance, two residential water heater rental companies accused of engaging in practices that intentionally suppress competition and restrict consumer choice (see question 7).
Impact on contracts
What are the consequences of an infringement for the validity of contracts entered into by dominant companies?
Unless necessary in order to restore competition, the Tribunal does not have the power to void a contract ab initio, although the breadth of its order-making power under section 79(2) includes the ability to order parties to terminate a given contract. It should be borne in mind that section 79(3), however, also requires the Tribunal to interfere as little as possible with the person’s or a third party’s rights in making an order.
The powers of the Federal Court to amend or void IP-related agreements are discussed in question 28.
To what extent is private enforcement possible? Does the legislation provide a basis for a court or authority to order a dominant firm
to grant access (to infrastructure or technology), supply goods or services or conclude a contract?
Section 79 (abuse of dominance) can only be enforced by the Commissioner. However, section 103.1 allows a private party, with leave of the Tribunal, to bring an application to the Tribunal under section 75 (refusal to deal), 76 (price maintenance) and section 77 (exclusive dealing, tied selling and market restriction). Several parties have sought leave to bring ‘refusal to deal’ cases under section 75 (for example, B-Filer Inc (B-Filer Inc doing business as GPay Guaranteed Payment) and NPay Inc v Bank of Nova Scotia). In a decision released on 4 March 2011, the Tribunal considered the test that parties must satisfy under section 103.1 before they will be permitted to bring applications before the Tribunal alleging refusal to deal. In Brandon Gray Internet Services Inc v Canadian Internet Registration Authority, the applicant, Brandon Gray, argued that the Canadian Internet Registration Authority (CIRA) had refused to re- certify its domain name and as a result of this non-certification it was unable to register a ‘.ca’ name for its clients. The Tribunal found that Brandon Gray had not met the test to obtain leave since it had failed
to demonstrate that CIRA’s refusal to certify had led to an adverse
34 Sanctions and remedies
What sanctions and remedies may they impose?
The Tribunal has broad remedial powers under section 79 of the Act where it finds that a practice of anti-competitive acts has had, is having, or is likely to have the effect of preventing or substantially lessening competition in a market. Both behavioural remedies, such as prohibiting a certain anti-competitive act, and structural remedies (such as a divestment of shares or assets), can be ordered. The latter (in section 79(2)) are applied where the Tribunal finds that a prohibition order is not likely to restore competition in the market where it has been prevented or lessened. Section 79(2) more generally allows the Tribunal to order a person ‘to take such actions […] as are reasonable and as are necessary to overcome the effects’ of the practice of anti-competitive acts in question.
Since March 2009, in respect of abuse of dominance, an AMP of up to C$10 million for a first order and up to C$15 million for each subsequent order can be levied. A list of aggravating and mitigating factors is supplied in the Act for the Tribunal’s consideration in selecting an amount, while another subsection states that the purpose
effect on competition. Another private action was commenced on 29 June 2011 and involved a refusal by the Insurance Bureau of Canada (IBC) to provide data on vehicle accident history to the Used Car Dealer’s Association of Ontario (UCDA). On 9 September 2011, the Tribunal granted leave to UCDA pursuant to section 103.1(7) to commence a refusal to deal application under section 75 of the Act; however, UCDA withdrew its application upon reaching a settlement with IBC (see question 24). Lastly, Safa Enterprises Inc filed a private action seeking leave to bring an application to the Tribunal under section 76 of the Act on 19 September 2013 (see question 19). This case is still pending before the Tribunal.
If necessary, in order to restore competition, the Tribunal can issue both behavioural and structural orders. As such, orders to provide access to infrastructure, or to supply goods or services or conclude a contract could be issued (and in the case of refusal to deal cases, have been issued).
In 2007, Bill C-454, a private member’s bill, if passed, would have broadened section 103.1 to include section 79 as one of the bases for a private party to apply to the Tribunal with leave. As the
Update and trends
On 25 September 2013, the Competition Bureau announced it had signed a letter of agreement with the Canadian Radio-television and Telecommunications Commission (CRTC) calling for closer
cooperation between the two agencies. The CRTC regulates Canada’s broadcasting and telecommunications sectors, applying many of the same principles as those enshrined in the Competition Act. Under the agreement, the parties agree that, where possible and subject to their respective confidentiality obligations, they will:
notify the other party with respect to a review or process under the Competition Act, the Telecommunications Act or the
Broadcasting Act that is of significant public importance, where a review or process with respect to the same matter could be carried out by the other party under its mandate, and exchange timing and other procedural information related to such reviews and processes;
participate in collaborative training exercises and knowledge transfer sessions to increase expertise in areas of mutual interest related to broadcasting and telecommunications;
share information related to best practices, including with respect to international policies and programmes, in areas of mutual interest related to broadcasting and telecommunications; develop an employee exchange programme, where the parties will host an employee from the other for a period of six to 12 months; and meet semi-annually at the senior management level to discuss the items enumerated above and to explore further opportunities for cooperation and collaboration.
In addition, on 9 September 2013, the Competition Bureau announced the introduction of a new criminal cartel whistle-blowing initiative. The Criminal Cartel Whistle-blowing Initiative will encourage members of the public to provide information to the Bureau regarding possible violations in sections 45 to 49. This initiative is in addition to the whistle-blowing initiative announced in May 2013, which encouraged the general public and business community to report suspected incidences of price fixing, big rigging and other anti-competitive activity.
bill died on the order paper in 2008 and has not been reintroduced, sections 75, 76 and 77 remain the sole bases for a private suit in respect of abusive conduct (as mentioned, private actions for damages incurred as a result of a criminal violation are also possible). It is notable that private parties cannot sue for damages in respect of abuse of dominance or the above-noted civilly reviewable practices.
and restrictive effect on real estate brokers’ access to and use of the TREB MLS system. The restrictions, it was alleged, prevent brokers from being able to use new and innovative business models and service offerings. TREB, in its defence, argued that it was exercising a legitimate proprietary right in its copyrighted database and hence its conduct fell within the exception for the exercise of intellectual and industrial property rights under section 79(5) of the Act. On 15
April 2013, the Tribunal dismissed the case and held that the abuse
Availability of damages
Do companies harmed by abusive practices have a claim for damages?
The Act does not allow those affected by abusive conduct to seek damages. Bill C-454 (see question 36), were it to have been passed, would have introduced the potential for an award of damages to private applicants granted leave to apply for an order under section 75 (refusal to deal), section 77 (exclusive dealing, tied selling and market restriction) or section 79 (abuse of dominance). Notably, the 2009 amendments did not provide for private claims for damages, opting instead for providing the Tribunal with the ability to impose administrative monetary penalties on abusive dominant firms (but only pursuant to an abuse of dominance case brought by the Commissioner).
of dominance provisions did not apply to TREB’s membership rules governing the use of its MLS data since, in order for anti-competitive conduct to be caught by section 79, the conduct must have had a negative effect on a competitor that is predatory, exclusionary or disciplinary (see question 7, the case has been appealed to the Federal Court of Appeal). In addition, two abuse of dominance cases are presently before the Tribunal. In both cases, filed together on 20 December 2012, the Commissioner is alleging that the residential water heater rental companies, Direct Energy and Reliance, have engaged in practices that intentionally suppress competition and restrict consumer choice through policies and procedures that impose significant costs on competitors and prevent customers from switching to those competitors (see question 7).
While not an ‘abuse’ case, the Commissioner filed a case against the Visa and MasterCard associations in December 2010,
alleging that rules imposed on merchants constitute price mainte-
Recent enforcement action
What is the most recent high-profile dominance case?
The most recent abuse cases involved allegations of abuse of dominance in the real estate brokerage industry. In a case brought in 2010, the Commissioner alleged that the Canadian Real Estate Association (CREA) imposed certain rules on the use of its Multiple Listing Service (MLS) trademarks that substantially lessened or prevented competition in the market for the supply of residential real estate brokerage services in Canada. In particular, the Commissioner alleged that CREA’s MLS rules reduced the variety of brokerage service packages available to homesellers, and forced consumers to use a full-service real estate broker if they wanted to list their homes on the MLS system. The Commissioner’s application against CREA was the first contested abuse of dominance case heard by the Tribunal since the Canada Pipe case was decided in 2005. The matter was settled on consent in October 2010, following voluntary amendments to the CREA MLS listing rules earlier in the year. The Bureau continued its scrutiny of the real estate industry when, on 27 May 2011, it launched an investigation into market practices by the Toronto Real Estate Board (TREB) (see question 7). The Bureau alleged that TREB’s control over the MLS system was being exercised in such a way that it was having an exclusionary
nance, with an adverse effect on competition. In this application, the Commissioner sought an order under section 76 prohibiting the credit card companies from entering into, enforcing or continu- ing agreements or arrangements that influence upward or discour- age the reduction of credit card acceptance fees. Both the Toronto Dominion Bank and the Canadian Bankers’ Association were granted leave to intervene in this case. On 23 July 2013, while acknowledging that Visa and MasterCard’s conduct is influenc- ing the price of credit card services in Canada upwards and hav- ing an adverse effect on competition, the Tribunal dismissed the Commissioner’s case, holding that section 76 of the Act requires a ‘resale’, and the Commissioner had not established that Visa and MasterCard’s customers resell Visa and MasterCard’s products (see question 19). The Tribunal also held, in the alternative, that even if section 76 did apply it would not have issued an order, finding regulation to be the preferable and more effective alternative. On 30 September 2013, the Commissioner announced that he would not appeal the Tribunal’s decision, but that the Bureau would focus its efforts on identifying alternative means of addressing the compe- tition issues in the supply of credit card services in Canada.
Also noteworthy is the Commissioner’s acceptance in 2013 of an application to modify a consent order issued in 1996 against the
42 Getting the Deal Through – Dominance 2014
Interac Association, an organisation that develops and operates a national payment network allowing Canadians to access their funds through automated banking machines and point-of-sale terminals. The consent order was issued under the abuse of dominance provi- sion of the Act in 1996 against Interac and the leading Canadian banks who were its founding members. At the time, the Tribunal deemed that the structure and rules regarding membership and services were inhibiting competition in financial services and pay- ments innovation. Among other requirements, the order required Interac to be managed on a not-for-profit basis. In 2009, Interac requested that the Commissioner consent to vary the 13-year-old order to allow Interac to restructure to a for-profit model. While the Commissioner was prepared to accept some changes to Interac’s
board structure, she did not agree that removing restrictions against for-profit activities would be pro-competitive or that such a modi- fication was necessary to allow Interac to remain competitive. On 12 July 2013, however, the Commissioner consented to a revised restructuring proposal, and on 11 September 2013, the Tribunal issued an amended consent order permitting Interac to restructure from an unincorporated to an incorporated form with an independ- ent board. The amended consent order includes safeguards to ensure open and non-discriminatory access to the Interac network and pro- vides that the restructured Interac Corp will operate on a cost-recov- ery basis and use profits to fund innovation. Once the restructuring has been successfully completed, the amended consent order will remain in force until June 2018.
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