CANADA
QUESTIONS
AND ANSWERS
COMMON
QUESTIONS AND ANSWERS
PRINCIPAL
LAWS
1. What
are the principal laws aimed at the protection of competition in your country?
Competition
Act R.S.C.,
1985 c.C-34, s.1; R.S., 1985, c.19 (2nd Supp.), s.19.
PRINCIPAL
AGENCIES
2. What
are the roles of the respective agencies involved in the enforcement of the
law?
A. Head
of State?
B.
Governments/relevant ministers?
The
Governor in Council (the Queen’s representative in Canada acting on the advice
of cabinet) appoints an officer known as the Commissioner of Competition
(formerly Director of Investigation and Research), who is responsible for the
administration and enforcement of the Competition Act.
The
Governor in Council (on the recommendation of the Minister of Justice) also
appoints the four members of the Competition Tribunal from among the judges of
the Federal Court of Canada and designates one of their members chairman of the
Tribunal.
The Minister
of Industry has certain statutory powers to compel action by the Commissioner
of Competition. He may instruct the Commissioner to undertake an inquiry, to
provide an interim report with respect to an inquiry, or to make further
inquiry where a matter has been discontinued.
The
Attorney General of Canada may institute and conduct any prosecution or other
criminal proceedings under the Act.
C.
Courts?
Aside
from their authority to convict for offences in relation to competition, the
courts enjoy a number of other powers under Part IV the Competition Act. The
Federal Court of Canada may, for the purpose of preventing any anti-competitive
abuse of patents, copyrights or trade-marks, declare void, restrain the
exercise of or otherwise nullify any exclusive rights or privileges thereby
conferred. The Federal Court or a superior court of criminal jurisdiction may
also issue an interim injunction, on application from the Attorney General of
Canada or of one of the provinces, forbidding the commission of an offence
under the Act. Where a person has been convicted of a criminal offence
under the Act, the court may make an order prohibiting the continuation
or repetition of the offence. The courts have, as well, the power to award
damages to any person who has suffered loss or damage as a result of offences
against competition. Prohibition orders may also be issued by the courts
without securing a conviction.
The
Competition Tribunal is a quasi-judicial tribunal which operates at arms length
of the Commissioner of Competition. Whereas the Commissioner’s role is
investigatory, the Tribunal’s role is exclusively adjudicative. Following an
application by the Commissioner, the Tribunal is empowered to issue orders
designed to remedy the effects of non-criminal anti-competitive business
conduct (referred to as Matters reviewable by Tribunal under the Competition
Act).
D.
Competition Agencies?
The Competition Bureau maintains and encourages fair competition in
Canada, by the administration and application of provisions of the Competition
Act. It is an organizational unit of the Federal Industry Department,
headed by the Commissioner of Competition.
The
Commissioner, who is responsible for the administration and enforcement of the Act,
has the power to launch inquiries, intervene as a competition advocate
before federal and provincial bodies, challenge civil and merger matters before
Canada’s Competition Tribunal, make recommendations on criminal matters to the
Attorney General as well as issue advanced ruling certificates for those
mergers which do not raise competition concerns.
E. Do
the competition agencies have any other administrative, decision-making or
negotiating roles?
The Fair
Business Practices Branch of the Bureau has a consumer protection role. Its
mandate is to promote fair competition in the market place by discouraging
deceptive business practices (in particular telemarketing fraud) and by
encouraging provision of sufficient information to enable informed consumer
choice. The Branch applies the
provisions of the Competition Act that deal with false or misleading
advertising and other deceptive practices, as well as two laws promoting fair
representation in the marketing of consumer products: the Textile Labelling
Act and the Precious Metals Marking Act.
THE
SUBSTANTIVE PROHIBITIONS IN YOUR COMPETITION LAWS
General
Prohibitions
3. Are
there any general prohibitions against anti-competitive behaviour in your
competition laws?
Section
45(1) of the Competition Act is the applicable provision. It states
Everyone who conspires, combines, agrees or arranges with another person (a) to
limit unduly the facilities for transporting, producing, manufacturing ,
supplying, storing or dealing in any product, (b) to prevent, limit or lessen,
unduly, the manufacture or production of a product or to enhance unreasonably
the price thereof, (c) to prevent or lessen, unduly, competition in the
production, manufacture, purchase, barter, sale, storage, rental,
transportation or supply of a product, or in the price of insurance on persons
or property, or (d) to otherwise restrain or injure competition unduly, is
guilty of an indictable offence...
Horizontal
Agreements
4. Does
your law have special provisions relating to...
A. Price
fixing?
Price
fixing is one of the indictable offences listed in the Act. Section
61(1) applies (It is referred to as price maintenance in the Act). It
prohibits any agreement, threat, promise or any like means... to influence
upward, or to discourage the
reduction of, the price at which any other person engaged in business in Canada
supplies or offers to supply or advertises a product within Canada. It is also
aimed at refusal to supply or other forms of discrimination against persons
carrying out a low pricing policy.
Specifically exempted from the ambit of Section 61(1) are situations
where both parties involved are affiliated with the same business or are
principal and agent.
Section
61(6) also states No person shall, by threat , promise or any like means, attempt to induce a supplier, whether
within or outside Canada, as a condition of his doing business with the
supplier, to refuse to supply a product to a particular person or class of
persons because of the low pricing policy of that person or class of persons.
B. Bid
rigging?
Bid
rigging is also an indictable offence under the Act (section 47(2)).
Exempted are agreements or arrangements entered into between affiliates.
C.
Market sharing?
There is
no specific provision in relation to market sharing arrangements. Such
arrangements would run afoul of the general conspiracy provision (section
45(1)), particularly section 45(1)(c), which prohibits conspiracies to prevent
or lessen, unduly competition in the... supply of a product.
D.
Output limitations?
Here
again, section 45(1)(c) would apply.
E.
Collective boycotts?
There is no specific provision
in relation to collective boycotts. Such conduct would fall within the general
provisions in s. 45 discussed above, and the non‑criminal provisions regarding
unilateral refusals to deal (s. 75) referred to below.
F. Trade
association activities?
There is no specific provision
in relation to trade association activities. Such activities are ordinarily
dealt with under the conspiracy provision in s. 45 but may also on occasion be
dealt with as a form of price maintenance under section 61.
Note that section 45(3)
specifically exempts a number of trade association activities from the general
conspiracy provision. The section provides: the court shall not convict the
accused if the conspiracy, combination, agreement or arrangement relates only
to one or more of the following:
a) the exchange of statistics;
b) the defining of product
standards;
c) the exchange of credit
information;
d) the definition of terminology
used in a trade, industry or profession;
e) cooperation in research and
development;
f) the restriction of
advertising and promotion, other than a discriminatory restriction directed
against a member of the mass media;
g) the sizes or shapes of the
containers in which an article is packaged;
h) the adoption of the metric
system of weights and measures; or
i) measures to protect the
environment
The above exemptions do not
apply if the conspiracy, combination, agreement or arrangement has lessened or
is likely to lessen competition unduly in respect of prices, quantity or
quality of production, markets or customers or channels or methods of distribution
or if the conspiracy, combination, agreement or arrangement has restricted or
is likely to restrict entry into or business expansion within the trade,
industry or profession (section 45(4)).
Section 45(7) provides a further
exemption from the general conspiracy provision to conspiracies, combinations,
agreements or arrangements relating only to a service and to standards of
competence or integrity that are reasonably necessary for the protection of the
public.
Please refer as well to the
discussion of the treatment of regulated industries under the Competition
Act in the answer to question 13 below.
G. Other horizontal agreements?
Section 46(1) makes it an
indictable offense for a corporation to implement in Canada a directive or
instruction for the purpose of giving effect to a conspiracy entered into
outside of Canada that, had it been entered into in Canada, would have been
contrary to section 45, where the person giving the directive is in a position
to direct or influence the policies of the corporation.
Section 48(1) makes it an indictable offense to conspire
to limit unreasonably the opportunities for any other person to participate, as
a player or competitor, in professional sport or to impose unreasonable terms
or conditions on those persons who so participate, or to limit unreasonably the
opportunity for any other person to negotiate with and, if agreement is
reached, to play for the team or club of his choice in a professional league.
Section 49(1) of the Act makes an indictable offence out of
conspiratorial agreements or
arrangements between financial institutions.
Section 86 sets up a registry
for specialization agreements ( a situation where two parties manufacture the
same two articles and each agrees to discontinue producing one article in order
to individually specialize in the production of the other). A specialization
agreement will be registered for a specified period of time provided efficiency
gains offset any prevention or lessening of competition. It must be shown that
the gains in efficiency would not likely be attained if the agreement were not
implemented. There must also have been an absence of coercion in making the
agreement. Registration exempts specialization agreements from the conspiracy
and exclusive dealing provisions of the Act (ss. 45 and 77
respectively).
Monopolization and Dominant Firm
Behaviour
5.A. Does your law have general
provisions prohibiting monopolization or dominant firm behaviour?
Dominant firm behaviour is
covered by section 79(1) of the Act. Such behaviour is reviewable by the
Competition Tribunal on application by the Commissioner of Competition. Where
the Tribunal makes a finding that (a) one or more persons substantially or completely
control, throughout Canada or any area thereof, a class or species of business,
(b) that person or those persons have engaged in or are engaging in a practice
of anti-competitive acts, and (c) the practice has had, is having or is likely
to have the effect of preventing or lessening competition substantially in a
market, the Tribunal may make an order prohibiting all or any of those persons
from engaging in that practice. The Tribunal may, if necessary, order further
remedial action, including the divestiture of assets or shares.
Consideration under section
79(4) is given to whether the anti-competitive practice results from superior
competitive performance.
Exempted from the application of
the Act are rights and privileges enjoyed under Canada’s intellectual
property legislation.
B. Are there any provisions
prohibiting dominant firms from charging excessive prices?
There is no such provision in
relation to dominant firm behaviour. Section 45(1)(b) prohibits conspiracies to
enhance unreasonably the price of a product.
C. Are there any provisions
defining a dominant position, or creating a presumption that firms with a
particular market share or size are in a dominant position?
The test under section 79(1)(a)
of the Act is whether one or more persons substantially or completely
control, throughout Canada or any area thereof, a class or species of
business (emphasis added). In Canada (Dir. of Investigation and
Research) v. Nutrasweet Co. the phrase substantial and complete control was
interpreted as meaning a share of the relevant market of 90% or above.
D. Are there any specific
provisions relating to predatory pricing?
Predatory pricing is an illegal
trade practice under the Competition Act. Section 50(1)(b) prohibits the
selling of products in one region of Canada at prices lower than in another
region for the purpose and having the effect of lessening competition
substantially or eliminating a competitor. Section 50(1)(c) prohibits the
selling of products at prices unreasonably low for the same purpose and to the
same effect.
In addition, for the purposes of
section 79 mentioned above, anti-competitive act is held to include selling
articles at a price lower than the acquisition cost for the purpose of
disciplining or eliminating a competitor.
E. Are there any specific
provisions relating to refusals to deal by dominant firms?
Refusal to deal is covered by
section 75 of the Act. It is one of the restrictive trade practices,
which can give rise to review and to a remedial order by the Competition
Tribunal. Where a party is substantially affected or precluded from carrying on
business due to its inability to obtain adequate supplies of a product because of
insufficient competition among suppliers, the Tribunal may order that one or
more of the suppliers accept that party as a customer on the usual trade terms.
F. Are there any specific
provisions relating to discriminatory behaviour by dominant firms?
Price discrimination is an
illegal trade practice under section 50(1)(a) of the Competition Act. A
discount, rebate, allowance, price concession or other advantage must have been
granted as part of a practice of discriminating to fall within the ambit of the
Act. Cooperative arrangements are exempted from section 50(1)(a).
Section 51(2) also makes an
indictable offence out of the granting of an allowance that is not offered on
proportionate terms to competing purchasers.
G. Are there any specific
provisions relating to exclusive dealing by dominant firms?
Exclusive dealing is a
restrictive trade practice reviewable by the Competition Tribunal under section
77(2) of the Competition Act. Where the Tribunal finds that exclusive
dealing is being engaged in, with the result that competition is lessened
substantially, it may issue a remedial order prohibiting the supplier from
continuing the practice. Exclusive dealing engaged in only for a reasonable
period of time to facilitate market entry of a new supplier or new product is
exempt as is exclusive dealing among affiliates.
H. Are there any specific provisions
relating to tie-ins?
Tie-ins (referred to as tied
selling under the Act) also fall under section 77(2). The same test
of substantial lessening of
competition is applied as for exclusive dealing. The same exemption for
affiliates applies._In addition, exceptions are made for tied selling that is
reasonable having regard to the technological relationship between or among the
products to which it applies and tied selling for the purpose of securing
loans.
I. Are there any specific
provisions relating to third line forcing?
Third line forcing is a form of
tied selling under the Competition Act and so is treated as described
above.
J. Are there any specific
provisions relating to territorial restrictions by dominant firms?
Territorial restriction is
referred to as market restriction under section 77(1) of the Competition Act.
It is one of the categories of trade practice reviewable by the Competition
Tribunal. Section 77(3) provides that where the Tribunal finds that market
restriction is being engaged in, with the effect that competition is being
lessened substantially, it may make a remedial order prohibiting the supplier
from continuing the conduct. Market restriction engaged in only for a
reasonable period of time to facilitate market entry of a new supplier is
exempt as are market restriction arrangements among affiliates.
K.
Are there any specific provisions relating to customer restrictions by dominant
firms?
Under section 78 (h)
anti-competitive act is defined to include 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. Such conduct can give rise to a prohibition order or
alternative order under section 79(2) of the Competition Act (see 5A
above).
L. Are there any other specific
provisions relating to monopolization or dominant firm behaviour?
Under section 78,
anti-competitive act is held to include a number of practices such as
acquisition of a customer who would otherwise be available to a competitor to
impede a competitor’s entry into the market, use of fighting brands on a temporary basis to discipline or
eliminate a competitor, purchase of products to prevent the reduction of
existing price levels and selling articles at a price lower than the
acquisition cost to discipline or eliminate a competitor. All such conduct can
give rise to a prohibition or alternative order under section 79(2) of the Competition
Act.
Section 76 of the Act provides
for the Competition Tribunal to make an order against a supplier engaged in
consignment selling (the practice of supplying products to a dealer who only
pays for what sells and is permitted to return unsold products without
penalty). To make such an order, the Tribunal must find that the practice was
introduced to control the price at which a dealer supplies the product or to
discriminate between consignees and other dealers.
Section 81(1) provides for the
Competition Tribunal to make a prohibition order against a supplier engaging in
delivered pricing (the practice of refusing a customer delivery of an
article on the same trade terms as
other customers in the same location). To make an order, the Tribunal must find
that customer has been denied an advantage available to other customers of the
supplier. Exceptions are made where accommodating additional customers would
require significant capital investment on the part of the supplier or where a
trade-mark is involved.
Section 84 empowers the Tribunal
to remedy a refusal to supply on the part of a foreign supplier by ordering the
appropriate person in Canada to sell the product in question to the person
discriminated against.
Vertical Restraints
6.
Does your law have specific provisions relating to...
A. resale price maintenance?
Price maintenance is an
indictable offence under section 61(1) of the Competition Act (see
question 4A above). Note that the provision does not apply in regard to
arrangements among affiliates or between principal and agent.
Section 61(3) provides that a
suggestion by a producer or supplier of a product of a resale price is, in the
absence of proof that no obligation was attached, proof of an attempt to
influence the resale price.
Section 61(4) provides further
that the publication of a supplier of an advertisement that mentions a resale
price for the product is a attempt to influence the price upward, unless the
price is so expressed as to make it clear that the product may be sold at a
lower price.
B. resale price maintenance
(specification of a maximum price)?
No.
C. Exclusive dealing?
Please see the answer to
question 5G above.
D. tie-ins?
Please refer to the answer to
question 5H.
E. third line forcing?
Please refer to the answer to
question 5I.
F. territorial restrictions?
Please refer to the answer to
question 5J.
G. customer restrictions?
Please refer to the answer to
question 5K.
H. Other non-pricing vertical
restraints?
Please refer to the answer to
question 5L.
Price Discrimination
7. Does your law have any
specific provisions relating to price discrimination?
Please refer to the answer to
question 5F above.
Mergers and Acquisitions
8. A. Does your law include a
prohibition for anti-competitive mergers and acquisitions?
Section 91 of the Competition
Act defines merger thus: the acquisition or establishment, direct or
indirect, by one or more persons, whether by purchase or lease of shares or
assets, by amalgamation or by combination or otherwise, of control over or
significant interest in the whole or a part of a business of a competitor,
supplier, customer or other person.
Section 92(1) provides Where on
application by the Commissioner, the Tribunal finds that a merger or proposed
merger prevents or lessens, or is likely to prevent or lessen competition
substantially... the Tribunal may... e) in the case of a completed merger,
order any party to the merger or any other person i) to dissolve the merger in
such manner as the Tribunal directs, ii) to dispose of assets or shares
designated by the Tribunal in such manner as the Tribunal directs, or iii)...
to take any other action, or f) in the case of a proposed merger, make an order
directed against any party to the proposed merger or any other person i)
ordering the person against whom
the order is directed not to proceed with the merger [or with any part
of the merger].
Section 96(1) provides that the
Tribunal will not make an order if it finds a merger or proposed merger is
likely to bring about gains in efficiency, which will clearly offset the
effects of any prevention or lessening of competition. It must also be shown that the gains in
efficiency would not likely be attained if an order were not made.
Section 94 excepts from the
ambit of section 92(1) a merger substantially completed before the coming into
force of the section and a merger or proposed merger under the Bank Act, the
Trust and Loan Companies Act or the Insurance Companies Act. Section
95(1) exempts under given circumstances a combination formed or proposed to be
formed, otherwise than through a corporation, to undertake a specific project
or a program of research and development.
B. Does your law contain any
provisions presuming certain mergers to be anti-competitive?
There are no statutory
provisions to this effect. Indeed, section 92(2) of the Competition Act
provides: For the purpose of this section, the Tribunal shall not find that a
merger or proposed merger prevents or lessens, or is likely to prevent or
lessen, competition substantially solely on the basis of evidence of
concentration or market share. Thus, the Tribunal is precluded from making an
order based purely on quantitative factors such as market share or degree of
concentration. Nonetheless, the Competition Bureau’s Merger Enforcement
Guidelines set thresholds below which mergers will generally not be subject to
a Competition Tribunal challenge by the Commissioner of Competition. The
thresholds are as follows:
1) No challenge will be made on
the ground that the merging parties will be able to unilaterally exercise
greater market power than before where their combined post-merger market share
is less than 35 percent;
2) No challenge will be made on
the ground that a merger will facilitate consciously parallel conduct raising
prices if the four largest firms share less than 65 percent of the post-merger
market;
3) No challenge will be made on
the ground that a merger will facilitate consciously parallel conduct where the
merged entity’s post-merger market share is less than 10 percent.
The above serve to generally
screen out mergers falling under the thresholds from further scrutiny. As
market share and degree of concentration increase above these thresholds, the
potential increases for a merger to give rise to concerns for the Competition
Bureau and eventually a tribunal challenge. In all cases, however, an
assessment of market shares and concentration is only a starting point for the
Bureau’s analysis.
In addition to the level of
market shares or concentration in the relevant market, an assessment is made of
the nature of market share_distribution and the extent to which market shares
have changed or remained the same over a significant period of time.
Section 93 sets out a number of
factors to be applied in determining the likelihood of whether a merger will
substantially lessen competition. These include the extent of foreign
competition, the likelihood of failure of one of the parties to the merger, the
availability of acceptable substitutes for the products supplied by the merging
parties, any barriers to market entry and the effect of the merger or proposed
merger on such barriers, the extent of any remaining competition, the effect of
the merger on competitors, as well as the nature and extent of innovation in
the relevant market.
According to the Merger
Enforcement Guidelines, the test for determining the likelihood of a
substantial prevention or lessening of competition as a result of a_merger is whether
the merger is likely to lead to a materially greater price in a substantial
part of the relevant market that is sustainable for more than two years. It is
from this point of view that the criteria in section 93 must be considered.
C. Does your law require firms
involved in mergers or acquisitions to notify competition agencies?
Under Part IX of the Competition
Act, companies are obliged to notify and provide information to the
Commissioner of Competition of a proposed merger when two thresholds are met.
The parties (and any affiliates) must have total assets in Canada or gross
annual revenues from sales in, from or into Canada of over $400 million . As
well, the value of the assets to be acquired or gross revenues generated by
those assets must exceed $35 million. In the case of a corporate amalgamation,
the second threshold is $70 million. There are also notification provisions for
a proposed acquisition of voting shares of a corporation. The first two
triggering thresholds for notification of share acquisitions are the same as
for a merger notification; in addition, the acquisition must result in the
acquiring party holding voting shares which exceed specified percentages.
The Competition Act contains
a number of exemptions to the notification requirement.
D. What are the time limits for
notification?
The recently amended section 123
sets out the waiting periods for notifiable transactions. Following
notification of a merger, the parties are required to wait either fourteen or 42 days before completing the
transaction depending upon the filing made. The Commissioner conducts an
investigation during this period to determine if the proposal raises any
competition concerns. In the case of acquisitions of shares, the waiting
periods are 21 and 42 days. The waiting period runs from the time that complete
information is received by the Commissioner of Competition.
E. What criteria are used to
identify which mergers must be notified?
Please refer to the answer to
question 8C above.
F. Does your law allow for
voluntary notification?
There are no provisions in the Act
in relation to voluntary notification, however there is nothing to prevent
parties from notifying the Commissioner of Competition of mergers or
acquisitions which fall below the mandatory thresholds indicated above.
G. What is the procedure to
prevent an anti-competitive merger or share acquisition?
As indicated in answering
question 8A above, the Commissioner of Competition must apply to the
Competition Tribunal for an order to prevent such a merger.
Deceptive or Misleading
Advertising or Representations
9. Does your competition law
contain any provisions prohibiting advertising which is deceptive or
misleading, or other misleading representations?
Section 52 of the Competition
Act makes false or misleading representation an indictable offence. It
states: No person shall, for the purpose of promoting, directly or indirectly,
the supply or use of a product or for the purpose of promoting, directly or
indirectly, any business interest, by any means whatever, knowingly or
recklessly make a representation to the public that is false or misleading in a
material respect.
Section 52.1 makes an indictable
offence of certain telemarketing practices. Section 52.1(2) requires disclosure
by telemarketers, at the beginning of each telephone conversation, of the
identity of the person on behalf of whom the communication is made, the nature
of the product or business interest being promoted, fair, reasonable and timely
disclosure of the price of any product whose supply or use is being promoted
and any applicable restrictions, terms or conditions. Failure to provide the information required is an indictable
offence. Section 52.1(3) prohibits telemarketers from making a representation
that is false and misleading in a material respect and from making delivery of
a prize or other benefit to a participant in a contest, lottery or game
conditional on prior payment. Section 52.1 contains a number of other
provisions in relation to telemarketing practices.
Section 54(2) makes an
indictable offence of the practice of double ticketing, by which suppliers
charge prices for a product that exceeds the lowest price at which the product
is advertised. Section 60 provides a good faith defence to persons charged
under section 54.
Sections 55 and 55.1 are in
relation to particular business practices (multi-level marketing plan and
scheme of pyramid selling). The latter practice is an indictable offence.
Unfair Use of Bargaining Position
10. Does your competition law
contain any provisions prohibiting firms from making unfair use of their
bargaining positions?
There are no such specific
provisions in the Competition Act. Potentially, both the criminal
conspiracy (s.45) and the abuse of dominance provisions of the Act
(s.79) might be invoked against unfair use of bargaining position (see above).
Coercive Behaviour
11. Does your competition law
contain any provisions aimed at preventing firms from taking action to
intimidate competitors or the customers of competitors?
There are no specific provisions
in the Competition Act to this effect. Such practice might fall afoul of
the abuse of dominant position provision of the Act (s.79 - see the
answer to question 5A above) and lead to a prohibition order by the Competition
Tribunal.