Misleading advertising/deceptive marketing practices
At the recent annual conference of the Canadian Bar Association's Competition Law Section, representatives of the Competition Bureau presented priorities for the coming year and discussed recent developments. This update discusses nine key developments in the enforcement of the non-criminal aspects of the Competition Act and the implications for businesses in Canada and abroad.
The age of 'appropriately aggressive enforcement' is here
The commissioner of competition announced that the bureau has moved from a period of digesting the significant amendments to the act made in 2009 to a phase of bringing cases based on the new law, which she termed "appropriately aggressive enforcement". In 2010 to 2011 the bureau has, among other things, challenged two mergers, pursued several abuse of dominance cases, challenged Visa and MasterCard's pricing practices and brought several actions for misleading advertising, one of which resulted in a significant settlement with Bell Canada for the maximum $10 million penalty.
If you sign a consent agreement, follow it
The commissioner demonstrated by her actions against Beiersdorf Canada Inc, maker of Nivea products, that parties which sign consent agreements to resolve cases must ensure that they follow the terms of these agreements. On September 7 2011 the commissioner announced a settlement with Beiersdorf regarding misleading claims made with respect to certain Nivea products; on September 22 2011 the commissioner announced that she had requested Beiersdorf to cease making inaccurate claims about the terms of the settlement. At the conference the commissioner announced that the bureau is pursuing contempt charges against another party for allegedly breaching the terms of a consent order. Breaching an order is a criminal offence under the act: on summary conviction there is a maximum $25,000 fine and/or up to one year's imprisonment; on conviction on indictment, the imprisonment term increases to a maximum of five years and the fine is left to the court's discretion.
Consumer protection is a high priority
The commissioner has stated that a renewed focus on enforcement will ensure that Canadians understand that "we will fulfill our responsibility fearlessly to promote and protect competition" and "build confidence in the marketplace and demonstrate the relevance of the bureau's work to Canadians in their everyday lives".(1) A common theme among the many cases brought to date by Commissioner Aitken is that most will have a direct impact on the wallets of Canadian consumers:
abuse of dominance cases against the Canadian Real Estate Association and Toronto Real Estate Board designed to lift restrictions that prevented lower-cost methods of selling homes;
misleading representation cases against Rogers Chatr, Bell Canada and Beiersdorf;
challenges to the fees imposed by Visa and MasterCard; and
a merger challenge against Air Canada and United Continental alleging that it will lead to higher fares for numerous trans-border routes.
Changes to Merger Enforcement Guidelines: greater flexibility but less certainty
The bureau concluded a year-long review process by releasing the final version of its revised Merger Enforcement Guidelines on the first day of the conference. The guidelines set out the bureau's analytical framework for reviewing mergers. Having issued two consultation drafts, the final version of the guidelines contained few surprises (for further information, please see "Competition Bureau issues consultation draft on new merger review framework"). The primary change relative to the 2004 version is the bureau's decision that defining relevant product and geographic markets is merely one analytical tool of many, which need not be undertaken in every case. This will afford both the bureau and merging parties greater flexibility in crafting arguments about the merits of potential transactions. The other major changes are that the bureau has consolidated the merger-related guidance it previously provided in other documents into the guidelines (eg, efficiencies), providing a 'one-stop shop' document for merger guidance. The final version of the revised guidelines also clarifies that its treatment of efficiencies takes precedence over the bureau's 2009 Bulletin on Efficiencies in Merger Review. The revised guidelines further provide greater detail on the bureau's approach to transactions involving minority interests and interlocking directorates, vertical mergers and monopsony power.
Smaller transactions will not escape scrutiny
The bureau reiterated its previous warning that it has increased its monitoring of smaller, non-notifiable transactions that may raise competition law issues and confirmed that one staff member has been tasked with monitoring media and transaction databases for such deals. Traditionally, the bureau reviewed only a handful of transactions every year that fell below the threshold for pre-merger notification (ie, the target has assets in Canada or revenues from sales in or from Canada of more than $73 million and the parties to the transaction, together with their affiliates, have assets in Canada or generate revenues from sales in, from or into Canada from those assets of more than $400 million). In January 2011 the bureau challenged a non-notifiable transaction and sought a possible remedy of dissolution, meaning that if successful, the vendors may need to return the funds and the entire deal could be undone. Parties to transactions below the notification threshold should ensure that they consider competition issues early in their transaction planning process in order to provide time to deal with the bureau if the transaction is likely to give rise to competition issues.
Transparency will be enhanced
Since the 2009 amendments, the bureau has introduced a number of guidance documents providing its view on how the new provisions of the act will be applied and what procedures will be followed in enforcing them. Bureau officials have indicated that they will continue to refine their guidance documents as they gain more experience with the new provisions. This includes expected updates to the Merger Review Process Guidelines and the Remedies Bulletin and the development of consent agreement templates. The bureau also intends to increase the frequency of its 'position statements', which are explanations of the approach used in particular transactions. Bureau officials indicated they will endeavour to release a position statement for each merger that has been classified as 'complex'. Finally, officials announced their intention to begin publishing a monthly mergers register that will include for each transaction the Mergers Branch reviews, the names of the parties, the industry involved and the outcome of the review. In the overwhelming majority of cases the bureau will already have had to contact market participants (ie, customers and suppliers of the parties) as part of its merger review, but in cases where no market contacts have been made, the mergers register could represent the initial public disclosure of a merger review. Parties in these situations may want to develop appropriate communications plans to manage the disclosure process.
Misleading advertising/deceptive marketing practices
Misleading advertising will not be tolerated
The bureau has increased its enforcement of the misleading advertising and deceptive marketing practices provisions of the act and intends to continue to do so. Misleading representation cases were brought against Rogers Chatr, Bell Canada and Beiersdorf, with the commissioner seeking significant remedies in each case, including maximum administrative monetary penalties. The bureau now considers that enforcement in this area is as much a priority as are actions against cartels, abuse of dominance or anti-competitive mergers.
Pending cases will clarify important new provisions
The price maintenance provisions of the act were changed in 2009, removing the criminal penalties and requiring that the conduct has had, is having or is likely to have an "adverse effect on competition" in a market. The commissioner has challenged the practices of Visa and MasterCard, arguing that they influence upward or discourage the reduction of card acceptance fees paid by merchants. In addition, the commissioner has challenged the proposed joint venture between Air Canada and United Continental on trans-border routes under the merger provisions of the act, as well as certain historical alliance agreements between Air Canada, United and Continental. These alliance agreements are being challenged under the new Section 90.1 of the act, which allows the commissioner to seek to block or alter the terms of an alleged anti-competitive agreement between competitors. This is the first challenge under this provision, which was added in 2009 and took effect on March 12 2010 when the changes to Canada's cartel provisions took effect. These cases should provide very important judicial guidance on these new provisions.
Guidance on abuse of dominance awaited
Despite issuing draft revised enforcement guidelines for the abuse of dominance in January 2009, there is no clear timeline for when either a subsequent consultation draft or a final version of the revised guidelines will be released. Initially delayed as the commissioner pursued her case against the Canadian Real Estate Association, it had been hoped the guidelines would be finalised after the parties reached a settlement. It is possible that the revised guidelines will need to await the conclusion of the commissioner's case against the Toronto Real Estate Board; preliminary hearings were set for mid-October 2011 but the main merits hearing has not yet been scheduled.
It is clear that the bureau is now in 'enforcement mode'. This reinforces the need for companies to revisit their own compliance programmes or to consider implementing a programme if they do not currently have one. With the recent amendments to the act having added hefty monetary penalties for certain civil matters, compliance is more important than ever. Moreover, it is clear that compliance programmes can never be regarded as static documents; they must be regularly reviewed and audited and corporate conduct and actions must be continually reviewed and assessed against these programmes.
For further information on this topic please contact Kevin Ackhurst at Norton Rose OR LLP's Toronto office by telephone (+1 416 216 4000), fax (+1 416 216 3930) or email (email@example.com).
(1) Remarks by Melanie L Aitken, Commissioner of Competition, CBA Spring Conference: Focus on Civil (Toronto, Ontario, May 3 2011), available at: www.competitionBureau.gc.ca/eic/site/cb-bc.nsf/eng/03383.html.
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