Anticompetitive agreements

Assessment framework

What is the general framework for assessing whether an agreement or concerted practice can be considered anticompetitive?

Offences in relation to competition are set out in Parts VI and VII of the Act. Section 45 makes it an offence to:

  • conspire, agree or arrange with a competitor to fix, maintain, increase or control the price for the supply of a product;
  • allocate sales, territories, customers or markets for the production or supply of a product; or
  • fix, maintain, control, prevent, lessen or eliminate the production or supply of a product.

Where these conditions are not met, an agreement may nonetheless be reviewable under section 90.1 of the Act where it prevents or lessens, or is likely to prevent or lessen, competition substantially in a market.

Additionally, agreements involving abuses of dominance may be reviewed under section 79 of the Act, which allows the Tribunal, on application by the Commissioner, to make an order prohibiting persons that substantially or completely control a class of business from engaging in practices of anticompetitive acts that have had, are having or are likely to have, the effect of preventing or lessening competition substantially in a market. However, subsection 79(5) of the Act sets out that an act engaged in, pursuant only to the exercise or enjoyment of any interest derived under certain IP legislation, including the Patent Act, is not an anticompetitive effect for the purposes of the abuse of dominance provision.

With respect to IP specifically, in its Intellectual Property Enforcement Guidelines (IPEGs), the Bureau sets out its framework for approaching anticompetitive conduct associated with the exercise of IP rights. The Bureau sets out that the Act generally applies to conduct involving IP as it would apply to conduct involving other forms of property. However, the Bureau applies a two-pronged approach to cases involving IP or IP rights: those involving something more than the mere exercise of the IP right; and those involving the mere exercise of the IP right and nothing else. The Bureau states in the IPEGs that it will use the general provisions of the Act (including those discussed above) to address the former circumstances and section 32 (special remedies) to address the latter. Section 32 addresses situations involving the use of exclusive rights and privileges conferred by patents, trademarks or copyrights to, for example, restrain trade or limit the production of products. In such cases, the Federal Court may take action, including declaring such an agreement or licence void in whole or in part. With respect to the general provisions, in practice, the mere exercise of IP rights has not been found to offend the Act.

Technology licensing agreements

To what extent are technology licensing agreements considered anticompetitive?

According to the IPEGs, licensing is, in many cases, pro-competitive, in that it facilitates use of an IP right by additional parties. However, to assess whether a technology licensing agreement is anticompetitive, the Bureau would examine the terms of the licence and assess whether they create, enhance or maintain the market power of either party to the agreement. Generally, the Bureau will ‘not consider licensing agreements involving IP to be anticompetitive unless they reduce competition substantially relative to that which would have likely existed in the absence of the licence’s potentially anticompetitive terms’.

Several cases have dealt with IP licensing agreements. For example, in Canada (Director of Investigation and Research) v Tele-Direct (Publications) Inc, the Tribunal found that the enforcement of trademark rights, including the refusal to license trademarks, even selectively, were not anticompetitive acts within the meaning of section 79(5) of the Act, because the Trademark Act grants to trademark owners the right to exercise these very rights.

The case of the Commissioner of Competition v the Toronto Real Estate Board (TREB), 2016 Competition Tribunal 7, also dealt in part with IP licences. The case involved a restriction on certain virtual uses of the TREB real estate multiple listing service (MLS) database. TREB argued that its copyright in the MLS database was a complete defence to the allegations that it had abused its dominance contrary to section 79 of the Act. In its 2016 decision, the Tribunal found, among other things, that the restrictions were more than the ‘mere exercise’ of TREB’s IP rights. TREB also argued that the Tribunal did not have jurisdiction to order it to grant compulsory IP licences, but the Tribunal found that its broad remedial jurisdiction included jurisdiction in respect of IP rights. In December 2017, the Federal Court of Appeal dismissed TREB’s appeal with costs (see Toronto Real Estate Board v the Commissioner of Competition, 2017 FCA 236). TREB sought leave to appeal to the Supreme Court of Canada but was denied.

Co-promotion and co-marketing agreements

To what extent are co-promotion and co-marketing agreements considered anticompetitive?

Such agreements are not per se or typically considered anticompetitive and are on their own unlikely to infringe the Act, particularly if the parties to the agreement are not competitors. However, the agreement may be considered an offence under section 45 if the parties to the agreement are competitors and the agreement, for example, fixes the price for the supply of a product, allocates sales territories or controls the production or supply of a product. Alternatively, the agreement may be reviewable under section 90.1 if the co-promotion or co-marketing agreement prevents or lessens, or is likely to prevent or lessen, competition substantially in a market.

Other agreements

What other forms of agreement with a competitor are likely to be an issue? How can these issues be resolved?

Any type of agreement, whether existing or proposed, between persons, of whom two or more are competitors, that prevents or lessens, or is likely to prevent or lessen, competition substantially in a market is reviewable under section 90.1. This provision could capture all types of agreements, including supply and distribution agreements, joint ventures, collaborative research agreements and consortium agreements.

Issues with vertical agreements

Which aspects of vertical agreements are most likely to raise antitrust concerns?

There is no definition of ‘vertical restraint’ in the Act; however, the Act sets out various types of vertical restraints that are reviewable under Part VIII, including:

  • tied selling: where a supplier, as a condition of supplying a particular product, requires or induces a customer to buy another product or other products;
  • refusal to deal: where, under certain circumstances, a business refuses to supply a product to another business despite that business being willing and able to meet the supplier’s usual trade terms;
  • exclusive dealing: where a supplier requires or induces a customer to deal only, or mostly, in certain products;
  • resale price maintenance: when a supplier prevents a customer from selling a product below a minimum price by means of a threat, promise or agreement, or where a supplier refuses to supply a customer because of their low pricing policy;
  • market restrictions: where the supplier requires the customer to sell the specified products in a defined market (ie, by penalising the customer for selling outside that defined market);
  • abuse of dominance: when a dominant firm, or group of firms, in a market engages in conduct intended to eliminate or discipline a competitor or to deter future entry by new competitors, with the result that competition is prevented or lessened substantially;
  • delivered pricing: the practice of refusing a customer, or potential customer, delivery of an article at any place where the supplier delivers the article to any other of the supplier’s customers, on the same trade terms; and
  • foreign refusal to supply: where a supplier outside Canada has refused to supply or otherwise discriminated in the supply of a product to a person in Canada at the instance and by reason of the exertion of buying power outside Canada by another person.

These restrictions are found in sections 75 to 81, and 84 of the Act.

Patent dispute settlements

To what extent can the settlement of a patent dispute expose the parties concerned to liability for an antitrust violation?

According to the Bureau’s IPEGs, an ‘entry-split’ settlement, pursuant to which generic firms enter the market on or before patent expiry, will not pose an issue under the Act. In other words, the Bureau is generally not concerned with settlements that specify a market entry date for a generic company that is on or before the expiry date of the patent and in which the generic company does not receive any other consideration.

However, a settlement pursuant to which the generic company enters the market on or before patent expiry and that includes a payment to the generic company, may be reviewed under section 90.1 of the Act or, in cases involving a potential abuse of dominance, section 79. The Bureau will generally not review a settlement under section 45 unless it is a ‘sham’ or it extends beyond the exclusionary potential of the patent by delaying generic entry past the date of patent expiry or by restricting competition for products unrelated to the patent in question. For further information, see section 7.3 of the Bureau’s IPEGs.

Joint communications and lobbying

To what extent can joint communications or lobbying actions be anticompetitive?

Competitors are not, per se, prohibited from engaging in joint communications or lobbying, but should exercise caution when doing so. The Bureau publishes a pamphlet that includes dos and don’ts for trade associations and their members. Among other things, trade associations and their members should:

  • use a third party to collect and disseminate information;
  • disseminate information in aggregated form;
  • ensure that measures are in place to prevent the disclosure of competitively sensitive information to or between individual association members; and
  • discourage private meetings between competitors under the pretext of association meetings.

Trade associations should not:

  • coerce members into sharing information or data (either directly or through use of unreasonable disciplinary measures);
  • set unreasonable or arbitrary criteria for membership such that certain competitors (or categories thereof) are excluded;
  • discriminate or impose sanctions against firms that do not adhere to rules regarding competitively important considerations;
  • engage in any form of price setting;
  • restrict advertising; or
  • use standard setting to artificially provide some competitors (actual or potential) with a competitive advantage over others.

Members of trade associations must, of course, refrain from communicating competitively sensitive information with one another, either at association meetings or related social events.

Public communications

To what extent may public communications constitute an infringement?

Generally, public communications will not constitute an infringement of competition law unless they, for example, constitute price signalling to competitors or they communicate planned market behaviours that could lead to coordinated actions by competitors within the market. If a public communication is made for the purposes of promoting a business interest and contains a statement that is false or misleading, that could pose issues under the misleading advertising provisions of the Act.

Exchange of information

Are anticompetitive exchanges of information more likely to occur in the pharmaceutical sector given the increased transparency imposed by measures such as disclosure of relationships with HCPs, clinical trials, etc?

Not necessarily, though competitors should be sure not to disclose competitively sensitive information to one another in the context of such disclosures, either directly or through intermediaries such as HCPs.