Canada: Monopolisation

Canadian antitrust enforcement is based on three core provisions: conspiracy, mergers and abuse of dominance. The abuse of dominance provisions, found in sections 78 and 79 of Canada’s Competition Act,1 are administered and enforced by the federal government through the commissioner of competition (the commissioner), the head of the Competition Bureau (the Bureau). The commissioner investigates allegedly anti-competitive conduct and, where grounds exist, brings a case before the Competition Tribunal (the Tribunal) for adjudication. The commissioner holds exclusive jurisdiction to challenge allegedly abusive conduct before the Tribunal. As of 2009, contravention of the abuse of dominance provisions can result in administrative monetary penalties (AMPs) of up to C$15 million for multiple violations of such provisions.

Canada continues to see active enforcement of the Competition Act. A new commissioner, John Pecman, was appointed in 2013. Commissioner Pecman, a 29-year veteran of the Bureau, is an economist by training who has served in all of the enforcement branches within the Bureau, most recently as head of the criminal matters branch.2 He has indicated in several speeches that he is committed to actively enforcing the Act and under his tenure two new abuse of dominance cases have indeed been launched.3 This follows the active enforcement agenda commenced by his predecessor, Melanie Aitken, who served as commissioner from 2009 to 2012. She challenged several mergers,4 pursued misleading advertising claims,5 continued to combat global and domestic cartels,6 and launched two abuse of dominance actions,7 among others. As described in more detail below, one of those abuse actions was settled, while the second, Commissioner of Competition v Toronto Real Estate Board (TREB), was heard by the Tribunal in September 2012. The Tribunal released its decision in April 2013, handing a clear defeat to the commissioner: the Tribunal rejected the commissioner’s case in a direct, eight page ruling. Commissioner Pecman has appealed the decision to the Federal Court of Appeal (FCA).

The TREB decision did not contain an extensive analysis of the abuse provisions, or offer a novel analysis of the Act and, as such, the FCA’s 2006 decision in Commissioner of Competition v Canada Pipe Company Ltd8 remains the leading case in this area. The Supreme Court of Canada declined to hear an appeal of the Canada Pipe matter,9 and the commissioner and the parties settled the matter rather than returning to the Tribunal for a rehearing in light of the FCA’s decision.10

Recent developments

Abuse of dominance enforcement guidelines

In March 2012, the Bureau released an updated draft version of its enforcement guidelines on the abuse of dominance provisions (the 2012 Draft).11 A previous version issued for public comment in January 2009 was never finalised (the 2009 Draft).12The 2009 Draft reflected developments in case law and economic thinking since 2001 when the original guidelines (2001 Guidelines) were published.13Generally speaking, there were no major changes to the enforcement framework for single-firm abuse of dominance in the 2009 Draft, but the discussion of joint dominance no longer suggested that the commissioner would need to demonstrate any coordinated conduct between the parties to support a case of joint dominance. Rather, according to the 2009 Draft, two or more firms that hold market power and are engaged in similar anti-competitive conduct could be considered jointly dominant. In addition, the 2009 Draft presented new or expanded discussions of certain key concepts in assessing whether a party or parties have engaged in anti-competitive conduct.

By contrast, the 2012 Draft was a much shorter document that offered less guidance than its predecessors. The 2009 Draft included discussions of common practices such as exclusive dealing, tying, bundling and bundled rebates, and denial of access to a facility or service. Likewise, it contained summaries of past Tribunal abuse decisions, a feature found in the 2001 Guidelines. The 2012 Draft contained neither. In addition, the 2012 Draft did not address several important developments flowing from the 2009 amendments to the Act, such as the criteria the Bureau will use in deciding to seek the imposition of AMPs for a breach of the abuse provisions. Likewise, with the repeal of the criminal prohibitions on price discrimination and predatory pricing, it was expected that such conduct would be dealt with under the abuse provisions. There was no discussion of price discrimination in the 2012 Draft and only two paragraphs dealt with predatory pricing concepts.

The Bureau released the final version of its Enforcement Guidelines on the Abuse of Dominance Provisions (2012 Guidelines) in September 2012, which replace all previous Bureau guidance on the topic.14 The 2012 Guidelines vary little from the 2012 Draft. Disappointingly, they do not respond to the criticisms about the reduction in guidance provided in the 2012 Draft relative to the 2009 Draft and 2001 Guidelines, and in fact offer less guidance than even the 2012 Draft in respect of joint dominance. Under Commissioner Pecman, Bureau officials have advised that additional guidance will be forthcoming on the Bureau’s approach to monopolisation, either by way of additional revisions to the 2012 Guidelines or an additional document containing frequently asked questions.

Recent cases

In December 2012, Interim Commissioner Pecman filed applications alleging that two residential water heater rental companies had each engaged in anti-competitive conduct contrary to section 79 of the Act. The commissioner alleges that Direct Energy Marketing Limited15 and Reliance Comfort Limited Partnership16 adopted restrictive policies that ‘intentionally suppress competition and restrict consumer choice... [that prevent] customers from switching to competitors.’17 The commissioner is seeking the maximum AMP against each company, the first time that the Bureau has sought such penalties since the Act was amended to include this remedy in 2009. Both companies are vigorously defending the allegations.

In April 2013, the Tribunal released its very brief reasons in the TREB case. This matter has its origins in another abuse of dominance case, launched in February 2010, when after three years of discussions and several months of negotiations, the commissioner commenced abuse of dominance proceedings against the Canadian Real Estate Association (CREA). The commissioner claimed that CREA was abusing its dominance in the market for residential real estate brokerage services.18 CREA owns, and its members operate, an online database (MLS) featuring homes for sale across Canada. The commissioner alleged that CREA’s restrictive rules governing access to the database lessen or prevent competition substantially by excluding competition from brokers and others wishing to offer a reduced set of services to customers. Although CREA offered to modify its rules following the filing of the application, the commissioner was not satisfied with the proposed rule changes as they did not prevent CREA from making future rule changes that would undercut the proposed changes. The commissioner continued with the application, which was scheduled to be heard by the Tribunal in April 2011.

However, in October 2010, the Bureau announced that the proposed settlement of its investigation into the practices of CREA had been approved by CREA members. The following day, a consent agreement reflecting the terms of the settlement was registered with the Tribunal. Under the settlement, which has a 10-year term, CREA will eliminate its ability to adopt anti-competitive rules that discriminate against real estate agents hired to perform limited functions, such as merely posting a listing on MLS.

The CREA settlement opened up the MLS system somewhat, but realtors offering alternative fee structures still faced restrictions at the local real estate board level on the type of information they could make readily available to the public. In May 2011, the commissioner commenced an abuse of dominance case against the TREB, the largest such board in Canada.19 The commissioner alleged that TREB was restricting how its member agents could provide information from the Toronto MLS system to their customers, thereby denying member agents the ability to provide innovative brokerage services over the internet. The Toronto MLS system contains data about previous listing and sale prices, historical prices for comparable properties in the area, and the amount of time a property has been on the market. The commissioner argued that, due to TREB’s restrictive practices, agents did not have the flexibility to share this important data with customers in innovative new ways, such as through password protected websites, also called virtual office websites, which permit a customer to search a full inventory of listings containing up-to-date data online, before making the decision to tour a home or attend an open house.

The case was heard in September 2012 and the Tribunal released its decision in April 2013. This remarkably short decision confirms existing case law which states that, in order to constitute abuse of dominance, the conduct of the dominant party must (with limited exceptions) have intended, negative effects on competitors.

The Tribunal concluded that TREB’s actions did not impact competitors, and therefore found three reasons why the commissioner’s case failed: it was inconsistent with existing FCA case law; it fell outside the 2012 Guidelines; and it was inconsistent with the Act.

The Tribunal first stated that it agreed with, and was bound by, the 2006 decision of the FCA in Canada v Canada Pipe Co. In that decision, the court had ruled that, to be an abuse of dominance, the dominant firm’s actions must have ‘an intended negative effect on a competitor that is predatory, exclusionary or disciplinary.’20 In this case, TREB admitted and the commissioner acknowledged that TREB does not compete with its members, meaning that TREB’s actions could not have a negative effect on a competitor as required by case law and by the abuse of dominance provisions of the Act.

The Tribunal rejected the commissioner’s view that section 79 includes abusive conduct by entities which are not competitors. The common element in eight of the nine examples of anti-competitive acts provided in section 78 is harm to a competitor, and the Tribunal held that it was possible to conceive of harm to a competitor in that ninth example.

Second, the Bureau’s own 2012 Guidelines, which are only guidelines and do not have the same force as case law or legislation, state that anti-competitive acts must be intended to have a negative effect on a competitor. The guidelines did make allowance for circumstances where actions not specifically aimed at competitors could be considered to be anti-competitive, which the Tribunal interpreted as a signal the Commissioner was unhappy with the result in Canada Pipe.

Finally, the Tribunal found that section 79(4) of the Act clarifies that abuse of dominance can only be found where there is a competitor that is affected by the anti-competitive behaviour. In light of this, the Tribunal concluded that section 79 could not apply to the facts of the case, because there was no competitor that was affected by TREB’s actions.

Interestingly, the Tribunal included an ‘observation’ that the commissioner might have grounds to proceed against TREB under section 90.1 of the Act, which is a civil prohibition against anti-competitive competitor collaboration. In such a case, the commissioner would need to argue that TREB’s members are competitors and that they were using the association to enact anti-competitive rules. The Tribunal noted that its observation was not intended to suggest whether such an action would be successful.

As noted above, Commissioner Pecman has appealed this decision to the FCA, arguing that the Tribunal adopted an overly narrow interpretation of section 79.

The Law and its goals

Objectives of the abuse of dominance provisions

Although Canada’s first antitrust law was introduced in 1889, the present civil abuse of dominance provisions were added when the Competition Act was significantly revised in 1986.21 At that time, the federal government issued a guide to the new Competition Act, in which it explained the objectives of the abuse provisions as follows:

Anti-competitive behaviour on the part of dominant firms imposes artificial restraints on the competitive process, impeding the market from efficiently allocating resources. In a healthy, dynamic economy, goods and services are supplied by the firms that can produce them most efficiently and adapt to the ever-changing demands of the marketplace. The proposed abuse of dominance provision will ensure that dominant firms compete with other firms on merit, not through the abuse of their market power. The provision is of particular importance for the protection of consumers, new entrants and, in particular, the small business community.22

The Tribunal has cited these objectives with approval,23 while the FCA noted that all of the objectives found in the purpose clause in section 1.1 of the Competition Act must be reflected in the abuse analysis.24 Given the competing nature of some of the objectives found in section 1.1 of the Competition Act, it remains to be seen how these will be reconciled in future cases.

Elements of the abuse of dominance provisions

Canada’s abuse of dominance law is generally similar to those of the US and the EU, in that simply possessing a dominant or monopoly position in the relevant market is not sufficient to attract liability. In order to violate these provisions, each jurisdiction requires anti-competitive conduct in combination with monopoly power that results in harm. The concept of attempted monopolisation, which is prohibited in the US, is not recognised in Canada.

In Canada, abuse of dominance is a civil reviewable matter, meaning that there is no liability until the Tribunal actually makes a finding that abuse of dominance has occurred. The provision is for general application to all sectors of the economy, a fact underscored by the 2009 repeal of special provisions designed to address abuse of dominance by a domestic airline.25 The 2012 Guidelines explicitly replace previous sectoral guidelines such as the Bureau’s guidelines outlining the potential application of the provision to the Canadian grocery sector,26 as well as an information bulletin on applying these provisions to the telecommunications industry.27

Under section 79, the commissioner must prove three elements on a balance of probabilities before the Tribunal may make an order proscribing the behaviour or imposing an AMP:

  • one or more persons substantially or completely control, throughout Canada or any area thereof, a class or species of business;
  • that person or those persons have engaged in or are engaging in a practice of anti-competitive acts; and
  • the practice has had, is having or is likely to have the effect of preventing or lessening competition substantially in a market.28

Section 78 sets out a lengthy and non-exhaustive list of ‘anti-competitive acts’.

It is important to note that section 79 specifies three distinct elements. The FCA in Canada Pipe stressed that in abuse of dominance cases the Tribunal must avoid the ‘interpretive danger of impermissible erosion or conflation of the discrete underlying statutory tests’29and applied a formalistic approach to the determination of each element. At the same time, the FCA did acknowledge that the same evidence is often relevant to more than one element.30

Dominance

The first element of abuse of dominance in Canada is that a firm or firms must have a dominant market position, that is, substantially or completely controlling a class or species of business. The term ‘control’ has been found to be synonymous with market power.31 A firm ‘controls or substantially controls a business’ if it possesses market power, namely, the power to profitably set prices above competitive levels for a significant period of time.32The Bureau generally considers one year to be a ‘significant’ period of time in the abuse context.33 This determination requires that relevant antitrust markets be defined and that their structure, barriers to entry, and the significance of market shares be examined. The Tribunal’s approach in abuse cases is to consider market definition and then market control.34

In measuring market power, the Tribunal and the FCA in Canada Pipe have accepted that there can be direct and indirect approaches to establishing this element.35The direct approach proves that prices are above some accepted competitive level. The indirect approach considers other indicia of market power such as market share, entry barriers and the countervailing power of customers.36The indirect approach is most often used because of the difficulty of determining a benchmark for competitive price.

Market definition

The assessment of market power starts with the definition of the relevant markets. The phrase ‘class or species of business’ has been determined to be ‘synonymous with the relevant product market’37and ‘the fundamental test or touchstone for determining the boundaries of the relevant product market is substitutability’.38 In accepting this economic approach to product market definition, the Tribunal has rejected a more commercial or non-economics based approach that might have focused on what firms believed were the necessary elements for the performance or conduct of the business.39

The phrase ‘throughout Canada or any part thereof’ in section 79 has been held to refer to the ‘geographic market’.40 To define the relevant geographic market, the Tribunal has adopted an approach similar to product market determination, namely, to identify the universe of effective competitors or substitute providers of a product through such economic theories as the hypothetical monopolist paradigm.41

It is important to note that the reference to ‘throughout Canada or any part thereof’ means that section 79 only applies to firms that are dominant within Canada. The jurisdictional limitations of section 79 were inherited from the conversion of the former criminal monopoly provisions into the current non-criminal reviewable abuse of dominance provisions. In the criminal context, monopoly provisions could only be applied within the boundaries of Canada.

The role of market share

Canada’s abuse of dominance law relies on market share as evidence of market power or dominance. A prima facie determination of market power may be made on the basis of market share in the relevant market.42

To date, there is no specific market share threshold for prima facie market power. All of the contested abuse cases thus far have concerned market shares in excess of 80 per cent, where a prima facie case was relatively obvious. But Canadian cases have found that ‘no prima facie finding of dominance would arise’ with respect to a market share below 50 per cent,43 and a 25 per cent market share ‘falls well short of a level that might be considered to indicate market power’.44

Notwithstanding these pronouncements by the Tribunal, from an enforcement perspective, the 2012 Guidelines state that ‘the Bureau’s general approach [to market share] is as follows:

  • a market share of less than 35 per cent will generally not prompt further examination;
  • a market share between 35 and 50 per cent will generally only prompt further examination if it appears the firm is likely to increase its market share through the alleged anti-competitive conduct within a reasonable period of time;
  • a market share of 50 per cent or more will generally prompt further examination; and
  • in the case of a group of firms alleged to be jointly dominant, a combined market share equal to or exceeding 65 per cent will generally prompt further examination.’45

However, it is important to note that the case law is clear that although market share is important to the abuse analysis, a finding of market power must be supported by findings other than market share, such as the existence of barriers to entry, the number and effectiveness of competitors, excess capacity and the state of the market.46 Where barriers to entry are non-existent, even a very large market share will not support a finding of market power.47

Anti-competitive conduct

The FCA’s decision in Canada Pipe dealt extensively with this element, and although much of the Tribunal’s analysis from previous cases remains relevant, the FCA’s decision could represent some significant shifts in the assessment of anti-competitive acts in future cases. In general, it remains that once dominance is established, it is necessary to consider the nature and frequency of the conduct in question. To be liable under section 79, a firm must have engaged in a ‘practice’ of anti-competitive acts. A ‘practice’ denotes more than an ‘isolated act’.48 Moreover, different types of individual anti-competitive acts taken together may constitute a practice.49

It is acknowledged that the more difficult task is in defining an ‘anti-competitive act’.50 Section 78 provides a list of illustrative examples of what may constitute anti-competitive acts for the purpose of determining whether an abuse of dominance has occurred. The list of anti-competitive acts in section 78 is not exhaustive51and, in fact, the Tribunal has effectively expanded the list in its decisions.

Although section 78 was an attempt to define acts that could constitute abuse, it has been of limited use because, in practice, it is often difficult in abuse cases to distinguish between when an act is anti-competitive and when it is a sign of healthy or normal commercial competition. For example, the Tribunal has acknowledged that its decisions to restrict competitive actions on the grounds that a competitor feels a dominant firm’s response has been ‘overwhelmingly intense’ may actually chill competition.52 But it may be that this balance has shifted somewhat as a result of the FCA’s Canada Pipe decision, where now the applicable standard is whether the impugned conduct is merely intended to have a ‘negative effect on competitors’.53

In general, in Canada Pipe, the FCA appears to adopt the approach of the Tribunal54 by holding that anti-competitive acts under section 78 are defined by their common purposes: the intention of a negative predatory, exclusionary or disciplinary effect on a competitor.55 An act’s purpose can also be described as its ‘overall character’. In evaluating ‘purpose’, the FCA generally adopted the approach of the Tribunal in previous cases and accepted that the relevant factors to consider include the reasonably foreseeable or expected objective effects of the act; and subjective intent, which, while not required, is considered informative.56

In order to establish whether an act was undertaken for an anti-competitive purpose, it is not necessary for the commissioner to prove a subjective intent to restrict competition.57 Anti-competitive purpose can generally be inferred from the nature of the act itself because the ‘respondent will be deemed to intend the effects of its actions’.58 Furthermore, the mere proof of some legitimate business purpose is not sufficient to overcome other indicia of anti-competitive acts.59

Therefore, although subjective intent is not required, intention remains an important element within subsection 79(1)(b) in determining the intended purpose of the act in question. When proving the intended nature of the negative effects on a competitor, the Tribunal may do so directly through subjective intent or indirectly by reference to the ‘reasonably foreseeable consequences’ of the act and the surrounding circumstances, or both.60

In what appears to be a shift from previous Tribunal approaches, the FCA held that there must be a complete delinking between the assessment of whether an act is anti-competitive and its impact on competition.61 In Canada Pipe, the FCA emphasised that the sub-section dealing with anti-competitive acts is concerned with an act’s effect on a competitor, not necessarily on competition: that is, a practice may be an anti-competitive act under subsection 79(1)(b) without resulting in a substantial lessening or prevention of competition under subsection 79(1)(c). The FCA found that a practice need not cause decreased competition, nor cause detriment to the consumer to be an anti-competitive act.62 Instead, the focus of analysis is on the purpose of the act in question regarding competitors.

It will remain to be seen in practice what conduct could be engaged in by a dominant firm that would not be found to have a ‘negative’ effect on a competitor that is not, for example, exclusionary. In many contexts, competitive and healthy competition entails acting to win business from competitors, which will necessarily have a negative effect on them and which necessarily implies that the competitor has been excluded from that same business opportunity.

A valid business justification may also provide an alternative explanation for the conduct in question and challenge the deemed intent behind the purpose of an act that resulted in anti-competitive effects.63 In Canada Pipe, the FCA clarified the requirements for a valid business justification, stating that it must provide a ‘credible efficiency or pro-competitive explanation, unrelated to an anti-competitive purpose, for why the dominant firm engaged in the conduct alleged to be anti-competitive’.64 For example, the FCA did not accept ‘improved consumer welfare’ as a valid business justification. The court stresses that, although important, the justification does not possess an independent role. It remains pertinent and probative only in relation to whether the act was performed for a ‘predatory, exclusionary or disciplinary negative effect on a competitor’.65 Therefore, it may only counter evidence of anti-competitive purpose and remains a factor to balance within subsection 79(1)(b).66

The Bureau offered its views on what a valid business justification must be in the 2009 Draft. The Bureau explains that such a rationale, ‘without limiting its scope, will often comprise activities that minimise costs of production or operation, independent of the elimination or discipline of a rival; or activities that improve a firm’s product, service, or some other aspect of the firm’s business’. However, if the cost savings can be achieved in an equally effective manner other than through the allegedly anti-competitive behaviour, the Bureau will not consider there to be a valid business justification.67Unfortunately, the 2012 Guidelines contain only a brief discussion of what constitutes a valid business justification.

Again, it will be interesting to see in future cases how, in practice, one will be able to show that an act has a valid business justification that is either efficient or pro-competitive, if one is precluded from justifying it on the basis of improved consumer welfare. Many would argue that the ultimate benefit and value in efficiency and pro-competitive conduct is, in fact, to be reflected in improved consumer welfare.

Competitive effects

The final element that must be proven before the Tribunal can make an order under subsection 79 is that the practice of anti-competitive acts has resulted or is likely to result in a substantial lessening or prevention of competition (SLC).

In assessing the effects on competition, the FCA in Canada Pipe observed that subsection 79(1)(c) requires an approach that emphasises comparative and relative considerations in respect of three specified time frames: past, present and future.68 Assessing an SLC requires a relative assessment rather than an absolute one: did the impugned practice result in a preventing or lessening of competition compared with the conditions governing in the absence of the practice, and was this lessening of a degree sufficient to be considered substantial?69

To accomplish this comparative interpretation, the FCA in Canada Pipe adopted a ‘but for’ test: ‘would the relevant markets – in the past, present, or future – be substantially more competitive but for the impugned practice of anti-competitive acts?’70 The FCA supports the use of the ‘but for’ test by referring to its use in the 2001 Guidelines as well as excerpts from previous Tribunal decisions.71 Also, the FCA highlighted the interpretation of earlier abuse of dominance cases where the Tribunal adopted tests comparable to the ‘but for’ test.72

Concluding that the ‘but for’ test is a correct approach, the FCA also left open the possibility that the Tribunal may consider other appropriate tests in future abuse of dominance cases.73 The court, however, held that although the ‘but for’ test is not necessarily the only test the Tribunal may use to establish an SLC, the requirements mandated by the statutory language of subsection 79(1)(c) demand that the Tribunal consider it. But the FCA went on to hold that whatever methodology the Tribunal chooses in any particular case, it must be ‘reflective of all the different objectives of the Act’.74 Although this may be a laudable objective, the difficulty lies in the fact that, in practice, this is very difficult as the Act’s objectives are often virtually irreconcilable in any particular case.

It is in this area that the FCA’s decision in Canada Pipe may have the most important implications. In general, the FCA’s decision holds that the strict focus of section 79 is to preserve competition in a market on a relative basis rather than an absolute basis. With what appears to be such a formal and strict approach, it will remain to be seen how many other acts would be caught by section 79. This is because the commissioner has to show both an intended negative effect on a competitor and a relative substantial lessening of competition even though it may be that the market, in fact, remains competitive. Also, it will be interesting to see if in future cases this type of analysis will, in practice, essentially shift the onus from the commissioner to the dominant party to prove the merit of its conduct.

Joint dominance

Although the vast majority of abuse of dominance cases concern the exercise of unilateral market power, the concept of joint abuse of dominance or shared monopoly by a group of unaffiliated firms also exists under subsection 79(1). However, the concept of joint dominance has received only a small amount of judicial consideration. Consequently, it has not been clearly defined to what extent the relationship between unrelated parties may constitute a joint abuse. In these cases, in order to establish dominance, it must be shown that one or more firms control or have joint market power.

Although it is unclear what type of relationship between parties would be contrary to section 79 in a joint abuse case, the Bureau had stated in its 2001 Guidelines that it would not pursue cases under the abuse provisions that are merely examples of ‘conscious parallelism’.75 (Whether uncoordinated conduct undertaken by more than one party could be addressed under section 77 of the Competition Act, which deals with tied selling, exclusive dealing and market restriction, where it is ‘widespread’ in a market, remains at least a legal possibility under the Act.) The Bureau has noted in its Strategic Alliances Bulletin that inter-firm cooperative arrangements may be open to review under abuse of dominance as well as the merger and conspiracy provisions.76

In June 2009, the commissioner secured a consent agreement with two waste services firms in British Columbia that the commissioner believed were engaged in joint abuse of dominance. The commissioner alleged that the firms, which held a greater than 80 per cent market share, engaged in similar anti-competitive contracting practices that resulted in substantially less competitive markets for commercial waste collection services. The firms agreed to revise their contracts and to refrain from engaging in such conduct for seven years.77 Of significant interest is the fact that there is nothing in the public version of the consent agreement that suggests there was any coordination or agreement between the two firms.

The 2009 Draft and the 2012 Guidelines no longer refer to the need to demonstrate coordination between the parties, with the result that two firms, neither of which would be considered dominant on its own, could be found to have engaged in joint dominance merely for engaging in a practice that is common in the industry. Bureau officials have recently acknowledged that additional guidance on joint dominance may be warranted.

Remedies

As indicated above, abuse of dominance is a non-criminal reviewable practice, and only the commissioner can commence a proceeding before the Tribunal to obtain a remedial order. Before commencing litigation, the commissioner’s policy is to approach the firm engaging in the conduct under investigation in order to seek a voluntary change in behaviour.78 Parties affected by the abusive conduct may only recover damages under the Competition Act if the party found to have engaged in abusive conduct breaches the remedial order issued by Tribunal. This is because such a breach is considered to be a criminal offence punishable by fine or imprisonment or both, and breaches of the criminal provisions of the Competition Act give rise to a statutory right of private action for single damages.

Once the Tribunal finds that a party has contravened section 79, it may issue an order under subsection 79(2) prohibiting the abusing parties from continuing the anti-competitive acts. If, on the other hand, the Tribunal concludes that a prohibition order is not likely to restore competition, it may make any other order against the dominant parties that is reasonable and necessary to overcome the effects of the practice of anti-competitive acts, such as an order that assets or shares be divested or that terms of a contract be rendered unenforceable.79 The term ‘may’ in subsection 79(2) provides the Tribunal some discretion to refuse to issue an order even though it has found there has been an abuse of dominance.80 But the exercise of the Tribunal’s discretion in this manner would be rare.81

As noted above, amendments made to the Competition Act in 2009 now permit the Tribunal to impose significant monetary penalties on those who are found to have engaged in abuse of dominance. The maximum AMP is C$10 million for a first violation and C$15 million for subsequent violations. The Bureau has not yet issued any guidance on when it shall seek an AMP and in what amount. It is hoped that this information will be provided when additional clarifications are made to the 2012 Guidelines. In addition, as the Bureau is seeking AMPs in the recently filed water heater rental cases, the commissioner’s pleadings will need to explain the rationale for seeking the maximum amount in that case.

Section 79 also sets out several specific circumstances in which the Tribunal is not entitled to issue an order. These include where:

  • the act in question is engaged in pursuant only to the exercise of an intellectual property right (in Canada, compulsory licensing is generally not a remedy available to the Tribunal under the abuse provisions of the Competition Act, but it is possible under section 32 for the attorney general to seek a compulsory licensing remedy in certain rare circumstances);82
  • the practice of anti-competitive acts occurred more than three years before the commissioner’s application;83 and
  • an application has already been brought based on the same or substantially the same facts pursuant to the Competition Act’s conspiracy or merger provisions.84

In the event that the Tribunal decides to issue an order, its terms may affect only the rights of the dominant parties against whom the order is directed or any other person affecting it to the extent necessary to achieve the purpose of the order,85 and it must adopt ‘the least intrusive course of action’.86 The Tribunal, however, has ‘broad jurisdiction to interfere with property rights not only of the party or parties before it but also of third parties who have contracts with the respondent’.87

The imposition of AMPs, questions about joint dominance, and whether a dominant firm’s anti-competitive conduct must target a competitor remain to be settled and are expected to be addressed through continuing consultations, updated enforcement guidance, and the resolution of ongoing cases.

Notes

  1. Competition Act, RSC 1985, c C-34 as amended (hereinafter Competition Act or Act).
  2. See, ‘John Pecman Appointed Commissioner of Competition’ available at http://news.gc.ca/web/article-eng.do?mthd=tp&crtr.page=1&nid=749319&crtr.tp1D=1.
  3. See, ‘Competition Bureau Takes Action to Support Competition in Ontario’s Residential Water Heater Market’ available at www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03520.html.
  4. Commissioner of Competition v CCS Corporation, Complete Environmental Inc, Babkirk Land Services Inc, Karen Louise Baker, Ronald John Baker, Kenneth Scott Watson, Randy John Wolsey, and Thomas Craig Wolsey, CT-2011-002, and Commissioner of Competition v Air Canada, United Continental Holdings Inc, United Airlines Inc, and Continental Airlines Inc, CT-2011-004. The Tribunal ruled in favour of the Commissioner in the former, and the latter was settled by Commissioner Pecman. The Tribunal’s decision in the CCS case was upheld by the Federal Court of Appeal, and the Supreme Court of Canada has agreed to hear an appeal of the FCA’s decision.
  5. Commissioner of Competition v Rogers Communications Inc, Ontario Superior Court of Justice file no. CV-10-8993-00CL, Commissioner of Competition v Bell Canada, Bell Mobility Inc and Bell Expressvu Limited Partnership, CT-2011-005, Consent Agreement, and Commissioner of Competition v Bell Canada, Rogers Communications Inc, TELUS Corporation and the Canadian Wireless Telecommunications Association.
  6. For example, 33 individuals and seven companies have now pleaded or been found guilty in the Competition Bureau’s investigation of price fixing in the retail gasoline industry in Quebec (see eg, www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03554.html), and in May 2011, Kason Industries Inc pleaded guilty to charges in connection with a customer allocation conspiracy in the sale of refrigeration and food service equipment components in Canada and the United States (see www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02644.html). The commissioner also secured guilty pleas under the new per se conspiracy provisions in January 2012. See ‘Competition Bureau Sends Signal to Price Fixers with $12.5 Million Fine’ available at www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/01353.html. Numerous guilty pleas have occurred and record-setting fines levied in connection with the ongoing global auto parts price-fixing and bid-rigging conspiracy as well.
  7. Commissioner of Competition v The Canadian Real Estate Association, CT-2010-002 and Commissioner of Competition v The Toronto Real Estate Board, CT-2011-003.
  8. Commissioner of Competition v Canada Pipe Company Ltd 2006 FCA 233, [2006] FCJ No. 1027 (hereinafter Canada Pipe).
  9. 2007 CanLII 16765 (SCC).
  10. See Competition Bureau reaches agreement with Canada Pipe Company Ltd, Competition Bureau News Release (Ottawa, 20 December 2007), available online at www.competitionBureau.gc.ca/eic/site/cb-bc.nsf/eng/02548.html.
  11. Competition Bureau, Enforcement Guidelines on the Abuse of Dominance Provisions (Sections 78 and 79 of the Competition Act) Draft for Public Consultation (March 2012), available at www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03445.html.
  12. Competition Bureau, Updated Enforcement Guidelines on The Abuse of Dominance Provisions (Sections 78 and 79 of the Competition Act) Draft for Public Consultation (January 2009), online at www.competitionBureau.gc.ca/eic/site/cb-bc.nsf/eng/02942.html.
  13. Competition Bureau, Enforcement Guidelines on the Abuse of Dominance Provisions (July 2001), online at: www.competitionBureau.gc.ca/epic/site/cb-bc.nsf/vwapj/aod.pdf/$FILE/aod.pdf.
  14. See, ‘The Abuse of Dominance Provisions’ available at www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03497.html.
  15. Commissioner of Competition v Direct Energy Marketing Limited, CT-2012-003.
  16. Commissioner of Competition v Reliance Comfort Limited Partnership, CT-2012-002.
  17. ‘Competition Bureau Takes Action to Support Competition in Ontario’s Rental Water Heater Market’ available at www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03520.html.
  18. Commissioner of Competition v The Canadian Real Estate Association, CT-2010-002, Notice of Application (filed 8 February 2010).
  19. Commissioner of Competition v The Toronto Real Estate Board, CT-2011-003, Amended Notice of Application.
  20. Canada Pipe, at paragraph 64.
  21. Before 1986, monopolisation was a criminal offence. The criminal prohibition against monopolies was originally enacted in 1910 (Combines Investigation Act chapter 9, subsection 2(c), 1910 SC) but it was seldom enforced. Between 1910 and 1986, only 11 prosecutions were brought.
  22. Consumer and Corporate Affairs Canada, Competition Law Amendments: A Guide (Supply and Services Canada, December 1985) at 21.
  23. See eg, Commissioner of Competition v Canada Pipe Company Ltd 2005 Comp Trib 3 at paragraph 7. See also Canada (Director of Investigation and Research) v D & B Companies of Canada Ltd (1995), 64 CPR (3d) 216 at 222-223 (hereinafter D&B Companies of Canada).
  24. See Canada Pipe, at paragraph 48. The purpose clause of the Competition Act is somewhat broader, and states that: ‘The purpose of this Act is to maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy, in order to expand opportunities for Canadian participation in world markets while at the same time recognising the role of foreign competition in Canada, in order to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy and in order to provide consumers with competitive prices and product choices.’
  25. Budget Implementation Act, 2009, 2009, c 2, s 427 repealed subsections 78(1)(j) and (k) of the Competition Act, effective 12 March 2009.
  26. Information Bulletin on the Abuse of Dominance Provision (sections 78 and 79 of the Competition Act) as Applied to the Canadian Grocery Sector’ (November 2002), online at strategis.ic.gc.ca/pics/ct/ct02465e.pdf.
  27. Information Bulletin on the Abuse of Dominance Provisions as Applied to the Telecommunications Industry (6 June 2008), online at www.competitionbureau.gc.ca/epic/site/cb-bc.nsf/en/02690e.html.
  28. Competition Act, at subsection 79(1).
  29. Canada Pipe, at paragraph 28.
  30. Canada Pipe, at paragraphs 27-28.
  31. Commissioner of Competition v Canada Pipe Company Ltd 2006 FCA 236, at paragraph 10 (hereinafter Canada Pipe Cross). See also Canada Pipe, at paragraph 65.
  32. Canada PipeCross, at paragraph 52. See also Canada (DIR) v NutraSweet Co (1990), 32 CPR (3d) 1 at 28 (Competition Tribunal) (hereinafter NutraSweet).
  33. 2012 Guidelines, at paragraph 2.3.
  34. Canada Pipe, at paragraph 53.
  35. Canada Pipe, at paragraph 122.
  36. Canada Pipe, at paragraph 122.
  37. The Tribunal in both Canada (DIR) v Laidlaw Waste Systems Ltd (1992), 4CPR (3d) 289 (hereinafter Laidlaw) and NutraSweet made an interpretation of subsection 79(1)(a) in which the Tribunal in D&B Companies of Canada agreed that: ‘Paragraph (a) specifically divides the two dimensions of a market: ‘class or species of business’ refers to the relevant product market and ‘throughout Canada or any area thereof’ to the relevant geographic market.’
  38. Canada PipeCross, at paragraph 12. See also Canada (DIR) v Tele-Direct (Publications) Inc (1997), 73 CPR (3d) 1 at 35 (Competition Tribunal) (hereinafter Tele-Direct).
  39. See eg, D&B Companies of Canada, at 224-25.
  40. Canada PipeCross, at paragraph 10. Tele-Direct, supra note 30 at 33. See also D&B Companies of Canada, at 232.
  41. Laidlaw, at 317.
  42. Canada Pipe, at paragraph 138. See also Canada PipeCross, at paragraph 24.
  43. Laidlaw, at 317.
  44. See Tele-Direct, at 217. See also Abuse of Dominance Guidelines.
  45. 2012 Guidelines at paragraph 2.3.1.
  46. Canada Pipe, at paragraph 138.
  47. Canada Pipe, at paragraph 138.
  48. Canada Pipe, at paragraph 60. See also Tele-Direct, at 211.
  49. Canada Pipe, at paragraph 69. See also NutraSweet, at 35.
  50. Canada Pipe, at paragraph 171.
  51. Canada Pipe, at paragraph 63. See also D&B Companies of Canada, at 257.
  52. Canada Pipe, at paragraph 191. See also Tele-Direct.
  53. Canada Pipe, at paragraphs 6, 68, 72, 78 and 82.
  54. Canada Pipe, at paragraph 64. See also NutraSweet, at 34.
  55. Canada Pipe, at paragraph 64. See NutraSweet, at 34.
  56. Canada Pipe, at paragraph 67. See also Tele-Direct, at 180.
  57. Canada Pipe, at paragraph 70. See also Laidlaw, at 334: ‘While subjective intent may not be a required element in order to find that a given practice (series of acts) is of an anti-competitive nature in this case such exists. It can therefore be taken into consideration as part of the relevant evidence.’
  58. Canada Pipe, at paragraphs 71-73. See also D&B Companies of Canada, at 257. See also 2012 Guidelines, at 3.2.
  59. Canada Pipe, at paragraph 88. See also D&B Companies of Canada, at 265. However, the concept of ‘superior competitive performance’ is relevant in determining whether a practice is likely to have the effect of preventing or lessening competition substantially in a relevant market, see Competition Act, subsection 79(4).
  60. Canada Pipe, at paragraph 72.
  61. Canada Pipe, at paragraph 77.
  62. Canada Pipe, at paragraphs 77, 80.
  63. Canada Pipe, at paragraph 73.
  64. Canada Pipe, at paragraph 91.
  65. Canada Pipe, at paragraph 87.
  66. Canada Pipe, at paragraph 88.
  67. 2009 Draft ,at 17-18.
  68. Canada Pipe, at paragraph 44.
  69. Canada Pipe, at paragraphs 36, 43.
  70. Canada Pipe, at paragraph 38.
  71. Canada Pipe, at paragraph 42. See 2001 Guidelines, at 5.
  72. Canada Pipe, at paragraph 51. See also Laidlaw, at 344-346. See D&B Companies of Canada, at 267. See NutraSweet, at 47.
  73. Canada Pipe, at paragraph 44.
  74. Canada Pipe, at paragraph 47.
  75. See 2001 Guidelines, at 17.
  76. Competition Bureau, ‘Strategic Alliances Under the Competition Act’ (Information Bulletin) (1995), online at www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/01671.html.
  77. Commissioner of Competition v Waste Services (CA) Inc and Waste Management of Canada Corporation, CT-2009-00, Consent Agreement (filed June 2009).
  78. Sheridan Scott, Commissioner of Competition, Speaking Notes re Abuse of Dominance Under the Competition Act, Federal Trade Commissioner/Department of Justice Hearings on Single-firm Conduct, Washington, DC, 12 September 2006, online at www.competitionBureau.gc.ca/epic/site/cb-bc.nsf/vwapj/Speech_Final_2006_09_11_EN.pdf/$FILE/Speech_Final_2006_09_11_EN.pdf.
  79. Competition Act, subsections 79(1) and (2). See Canada (DIR) v Bank of Montreal (1996), 68 CPR (3d) 527 at 528 (Competition Tribunal) (hereinafter Bank of Montreal): ‘In an abuse of dominance case, the test is whether the consent order will, in all likelihood, eliminate the substantial lessening of competition which is presumed to result from the practice of anti-competitive acts identified in the application.’
  80. D&B Companies of Canada, at 278. The circumstances of this case justified the Tribunal’s decision not to issue a remedy order. The Tribunal found that competition in the relevant market would be less effective if an order were issued against the defendant.
  81. D&B Companies of Canada, at 278.
  82. Competition Act, subsection 79(5). Under section 32, there is a provision for compulsory licensing that has never been used in a contested case. That section, however, confers jurisdiction only to the Federal Court of Canada. See also Intellectual Property Enforcement Guidelines (September 2000), online at strategis.ic.gc.ca/pics/ct/ipege.pdf.
  83. Competition Act, subsection 79(6).
  84. Competition Act, subsections 79(7), 45(1), and 98.
  85. Competition Act, subsection 79(3).
  86. Bank of Montreal, at 528. The Tribunal’s first goal in making an order is to restore competition, or in other words, to eliminate the substantial lessening of competition. And if there are alternatives available, then they must adopt the least intrusive course of action.
  87. See Laidlaw, at 352.

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