Copyright© 2010 WeComply, Inc. All rights reserved. 10/17/2015 Canadian Competition Law.

Copyright© 2010 WeComply, Inc. All rights reserved.

04/20/23

Canadian Competition Law

Copyright© 2010 WeComply, Inc. All rights reserved. 3

The Competition Act• Competition Act is the oldest competition statute in western world

• Purposes: To promote competition, enhance economic efficiency and strengthen Canada's status globally

• Commissioner of Competition enforces the Act with assistance of Competition Bureau

• Competition Tribunal handles civil matters

• Cooperation agreements with U.S., E.U., Australia, New Zealand and Mexico

• Mutual Legal Assistance on Criminal Matters Treaty enables U.S./Canadian officials to use local criminal investigative powers on behalf of other jurisdictions


The Competition Act (cont’d)

• Competition Act is the oldest competition statute in western world

• Purposes: To promote competition, enhance economic efficiency and strengthen Canada’s status globally

• Commissioner of Competition enforces the Act with assistance of Competition Bureau Competition Tribunal handles civil matters

• Cooperation agreements with U.S., E.U, Australia, New Zealand and Mexico

• Mutual Legal Assistance on Criminal Matters Treaty enables U.S./Canadian officials to use local criminal investigative powers on behalf of other jurisdictions


Relationships with Competitors

The Competition Act prohibits conspiring, combining, agreeing or arranging with another person to prevent or restrict competition unreasonably

Red Flag #1 – Price-Fixing•Most serious form of anti-competitive conduct•Includes arrangements that have effect of influencing any price-related matter

Red Flag #2 — Allocating Markets or Customers•Agreement between competitors to allocate customers, territories or business opportunities is serious criminal offense•Competitors may not agree that one will not sell in certain areas or to certain customers


Relationships with Competitors (cont’d)

The Competition Act prohibits conspiring, combining, agreeing or arranging with another person to prevent or restrict competition unreasonably

Red Flag #1 – Price-Fixing•Most serious form of anti-competitive conduct•Includes arrangements that have effect of influencing any price-related matter

Red Flag #2 — Allocating Markets or Customers•Agreement between competitors to allocate customers, territories or business opportunities is serious criminal offense•Competitors may not agree that one will not sell in certain areas or to certain customers


In the news…


Relationships with Competitors (cont'd)

Red Flag #3 — Bid-rigging

•Includes (a) agreement not to bid or to withdraw a bid or (b) agreement regarding the contents of a bid

Red Flag #4 — Boycotts

•Agreement between competitors that they will (a) not do business with a certain supplier or customer or (b) do business only with certain suppliers or customers may be illegal boycott

Red Flag #5 — Agreements about Product Quality or Quantity

•Agreements among competitors to produce a certain size or type of product violate Competition Act


Special Note…


Reviewable Trade Practices

Trade practices that may have substantial negative effect on competition may be reviewed by Tribunal•Tribunal can issue order to cease activity•Reviewable practices are civil law matters Consult with counsel before continuing or discontinuing practices in these areas

Red Flag #6 – Market Restriction•Occurs when supplier restricts sale of product to a defined market as condition of supplying product•Tribunal will issue order to cease if competition is lessened•Allowable to enable new supplier or product to enter market


Reviewable Trade Practices (cont’d)

Red Flag #7 — Refusals To Deal

Supplier who refuses to deal with a particular customer may be ordered to supply product on normal terms if —

•The product is in ample supply

•The refusal would restrict competition

•Buyer cannot obtain an adequate supply of product

•Buyer is willing/able to comply with normal trade terms

•Buyer's business is adversely affected by refusal



Red Flag #8 — Resale Price Maintenance

•Company generally may choose its own customers

•Once customer relationship is established, certain supplier practices are reviewable

•Tribunal must find “adverse effect” on competition before issuing order to cease

•Resellers have freedom to set their own process

•Suppliers may compete through low-pricing policies

Suggested resale prices are permissible if they are not made with coercion or inducements



Red Flags #9 and #10 — Exclusive Dealing/Tied Selling

•Exclusive dealing: Requirement to buy exclusively from one supplier in exchange for special terms

•Tied selling: Making availability of one product contingent on purchase of another through inducement or mandate

Reviewable if –

•They would have adverse effect on competition

•Supplier has major market share

•They would inhibit entry or growth of another company or product in market


Pop Quiz!

Certain trade practices that would otherwise be illegal may be allowable to enable a new supplier or product to enter the market.

A.True.

B.False.


Abuse of Dominance

Red Flag #11 — Abuse of Dominance•Monopolies are not illegal per se•Tribunal may review allegation that organization used its large market share to restrict competition substantially

An abuse of dominance will be found if –•Organization has dominant position or joint dominant position with another organization•Dominant position was abused•Abuse had effect of limiting competition substantially Penalties may be as high as C$10 million for first offense and C$15 million for second offense


Abuse of Dominance (cont’d)

Red Flag #11 — Abuse of Dominance•Monopolies are not illegal per se•Tribunal may review allegation that organization used its large market share to restrict competition substantially

An abuse of dominance will be found if –•Organization has dominant position or joint dominant position with another organization•Dominant position was abused•Abuse had effect of limiting competition substantially Penalties may be as high as C$10 million for first offense and C$15 million for second offense



Red Flag #12 — Price Discrimination

Price discrimination: Granting price-related advantages to one customer that are not made available to competing customers who buy like quantity/quality

•Applies only to sales to competing buyers

• Seller may offer quantity-based discounts, as long as same discounts are offered to competing buyers

Price discrimination is reviewable if it appears to be abuse of dominance Same is true for geographic price discrimination – i.e., selling product in one part

of Canada at prices lower than sold elsewhere in country



Red Flag #13 — Predatory Pricing

Predatory pricing: Selling at unreasonably low prices to drive out competition

•Comes under Tribunal review if it may be abuse of dominance

• Whether pricing product below cost is predatory depends on surrounding circumstances

Red Flag #14 — Promotional Allowances

Price-related promotional advantages offered to one customer but not proportionally to all competing customers are reviewable


Merger Control and Review

Merger: Acquisition of control over at least a part of a competitor’s business Review initiated only by Commissioner Depending on assets and revenues involved, parties may have to alert Commissioner• Parties may wait for Bureau approval or postpone closing until after waiting

period• Bureau can still challenge merger for up to one year Bureau may issue positive clearance in the form of an Advance Ruling Certificate or

a no-action letter Bureau will determine validity of challenge to merger by considering whether it will

restrict or prevent competition substantially


Merger Control and Review (cont’d)

Merger: Acquisition of control over at least a part of a competitor’s business Review initiated only by Commissioner Depending on assets and revenues involved, parties may have to alert Commissioner• Parties may wait for Bureau approval or postpone closing until after waiting

period• Bureau can still challenge merger for up to one year Bureau may issue positive clearance in the form of an Advance Ruling Certificate or

a no-action letter Bureau will determine validity of challenge to merger by considering whether it will

restrict or prevent competition substantially


Pop Quiz!

Companies considering a merger must share information with each other so that they can accurately evaluate their prospective business opportunity.

A.True.

B.False.


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Final Quiz


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Questions?


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Thank you for participating!

This course and the related materials were developed by WeComply, Inc. and the Association of Corporate Counsel.

Copyright© 2010 WeComply, Inc. All rights reserved. 10/17/2015 Canadian Competition Law.

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