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.
Other Substantive Provisions
12. Does your competition law
have provisions for the protection of competition other than those outlined
above?
Part IV of the Competition
Act provides for a number of special remedies to be imposed by the courts
(see the answer to question 2C above). In addition, section 31 provides for
cabinet to remove or reduce customs duties whenever, as a result of an inquiry
under the Act, it appears that customs duties have helped to prevent or
lessen competition substantially in respect of any article.
Part X provides the Commissioner
of Competition with an advocacy role. He is entitled to make representations to
any federal or provincial board , commission or other tribunal on competition
matters.
Sections 66.1 and 66.2 of the Act
are also noteworthy. Section 66.1 guarantees that the identity of
whistleblowers will be kept confidential if requested. Section 66.2 protects
whistleblowers from dismissal, suspension, demotion, disciplinary action,
harassment or other forms of disadvantage on the part of employers.
EXEMPTIONS FROM THE PROVISIONS
OF YOUR COMPETITION LAW
13. If there is a potential
conflict between your competition law and other laws, how do you determine
which law takes precedence?
Case law in Canada has developed
what has come to be known as the regulated conduct or regulated industries
defence to conspiracy charges under federal competition legislation. In a 1982
decision, the Supreme Court of Canada ruled that the conspiracy provisions of
the Combines Investigation Act (the predecessor to the Competition
Act) did not apply to the actions of the Law Society of British Columbia in
restricting price advertising as such restrictions were authorized (even if not
in express terms) by a valid provincial statute. The majority decision reasoned
that federal criminal law contemplated conduct contrary to the public interest.
It was argued that actions authorized by a valid provincial statute could not
possibly be regarded as contrary to the public interest.
Thus, the regulated conduct
doctrine may, in the appropriate circumstances, shield anti-competitive
business conduct from the application of the Competition Act, if that
conduct arises from acting in accordance with statutes or regulations enacted
by the federal or provincial governments.
14. Does your competition law
exempt or partially exempt agreements aimed at controlling the flow of imports
into your country?
No.
15. Does your competition law
exempt or partially exempt agreements between exporters from your country?
Section 45(5) of the Act
exempts from the general conspiracy provision (s.45(1)), agreements or
arrangements relating only to the export of products from Canada.
Section 45(6) contains a number
of provisos:
(6) Subsection (5) does not
apply if the conspiracy, combination, agreement or arrangement (a) has resulted
in or is likely to result in a reduction or limitation of the real value of
exports of a product; (b) has restricted or is likely to restrict any person
from entering into or expanding the business of exporting products from Canada;
or (c) has prevented or lessened or is likely to prevent or lessen competition
unduly in the supply of services facilitating the export of products from
Canada.
16. Are there any specific
products or industries which are exempted or partially exempted from your
competition law?
The Competition Act
contains a number of activity- or sector-specific exemptions. Section 4(1)
exempts entirely from the Act various collective bargaining activities
(including among employers in a particular trade, industry or profession).
Section 5(1) exempts securities underwriters from the application of the
general conspiracy provision (s.45) and from the price maintenance provision
(s.61) of the Act. Agreements or arrangements among amateur sports
teams, leagues or clubs are exempted entirely from the Act under section
6(1).
Financial institutions enjoy a
particular status under the Act. There is a specific provision of the Act
(s.49) making an indictable offence out of conspiracies among financial
institutions. Such conspiracies are exempted from the general conspiracy
provision of the Act. Section 49 contains numerous exemptions, including
an agreement or arrangement which the Minister of Finance has approved
(s.49(2)(h)). Section 94(b) provides as well that a merger or proposed merger
under the Bank Act, the Trust and Loan Companies Act or the Insurance
Companies Act to which the Minister of Finance has given his approval is
exempted from the usual requirement for approval by the Competition
Tribunal.
17. Are there any exemptions or
partial exemptions from your competition law for small and medium size
businesses?
No.
18. Does your competition law
contain any exemptions or partial exemptions for rationalisation cartels?
Please refer to the answer to
question 4G (the discussion of the treatment of specialization agreements under
s.86).
19. Does your competition law
contain any exemptions or partial exemptions for depression cartels?
No.
20. Are government agencies
exempted or partially exempted from your competition law?
No. Indeed, section 2.1 of the Competition
Act specifies: This Act is binding on and applies to an agent of Her
Majesty in right of Canada or a province that is a corporation, in respect of
commercial activities engaged in by the corporation in competition, whether
actual or potential, with other persons to the extent that it would apply if
the agent were not an agent of Her Majesty.
21. Is there any provision for
competition agencies or the relevant ministers to exempt specific activities
from the competition law?
There is no provision for the
Bureau or the relevant minister to exempt specific activities from the
competition law. Please note though the regulated industry defence discussed in
the answer to question 13.
22. Does your competition law
contain any exemptions for actions relating to the protection of intellectual
property rights?
Section 79(5) provides an
exemption to the abuse of dominance provision of the Competition Act for
acts engaged in pursuant only to the exercise of any right or enjoyment derived
under Canada’s intellectual property legislation. Please refer to the answer to
question 5A.
23. Does your competition law
exempt or partially exempt labour market activities?
Collective bargaining activities
are exempted under s.4(1). Please refer to the answer to question 16 above.
24. Are there any exemptions
from your competition law other than those outlined above?
Trade association activities are
substantially exempted from the conspiracy provision (s.45(1)) of the Competition
Act. Please refer to the answer to question 4F above.
The Competition Act provides
that the criminal prohibitions of conspiracy and price maintenance (s.61), as well as the non-criminal
provisions in relation to exclusive dealing, market restriction and tied
selling (all s.77) do not apply to arrangements or agreements among affiliated
companies. Section 77 also provides for a number of other exemptions (please
refer to the answers to questions 5G, H and J above).
Section 95 exempts joint
ventures from the merger review mechanism under section 92 of the Act.
Please refer to the answer to question 8A.
INTERNATIONAL APPLICATIONS
25. To what extent are the
overseas activities of your citizens or organizations covered by your
competition law?
The authoritative Canadian case
on territorial jurisdiction is R. v. Libman, a 1985 decision of the
Supreme Court of Canada. The majority held all that is necessary to make an
offence subject to the jurisdiction of our courts is that a significant portion
of the activities constituting that offence took place in Canada . As it is put
by modern academics, it is sufficient that there be a ‘real and substantial
link’ between an offence and this country, a test well-known in public and
private international law. [emphasis added]
In Libman, it is worth
noting, the conduct in question occurred in Canada. The defendant operated a
boiler room in Toronto from which fraudulent sales of securities were made by
telephone to US residents.
Subsequent cases relying on the Libman test for assertion of
jurisdiction in criminal matters all involved situations in which an essential
element of the offence took place in Canada. It remains to be seen how a
Canadian court will apply the Libman test in a situation in which
criminal conduct occurring abroad has an impact in Canada.
Several provisions of the Competition
Act are potentially applicable to extraterritorial conduct. Notably, the
conspiracy provision of the Act (s. 45) has been used by the Commissioner of
Competition to convict (on a guilty plea) a US company and Japanese company who
had entered into an agreement outside Canada to restrain competition in the
sale of thermal fax paper. The issue of jurisdiction was not specifically
addressed in this case. Section 46 prohibits the implementation by a
corporation carrying on business in Canada of a foreign conspiracy or agreement
that, if entered into Canada, would contravene the conspiracy provisions of the
Act. In addition, subsection 465(4) of the Criminal Code provides that
Every one who, while in a place outside Canada, conspires with anyone to do
anything referred to in subsection (1) [which may include conspiring to commit
an indictable offence under the Competition Act] in Canada shall be
deemed to have conspired in Canada to do that thing. In other words, an
agreement reached in the United States to engage in criminal conduct in Canada
would contravene subsection 465(4).
Subsection 61(6) of the Act is
also noteworthy. It provides 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 [emphasis added]. None of the cases
that have considered this provision has raised a significant territorial issue.
Section 84 has an
extraterritorial aspect to it as well. It provides:
Where, on application by the
Commissioner, the Tribunal finds that a supplier outside Canada has
refused to supply a product or otherwise discriminated in the supply of a
product to a person in Canada (the "first" person) at the instance of
and by reason of the exertion of buying power outside Canada by another person,
the Tribunal may order any person in Canada (the "second" person) by
whom or on whose behalf or for whose benefit the buying power was exerted
(a) to sell any such product of
the supplier that the second person has obtained or obtains to the first person
at the laid‑down cost in Canada to the second person of the product and on the
same terms and conditions as the second person obtained or obtains from the
supplier [emphasis added]
In recent years, both in his
investigations and public statements, the Commissioner of Competition has
indicated a desire to take an expansive view of the territorial jurisdiction of
the Competition Act so as to potentially take in conduct occurring
outside of Canada. Yet it is noted that convictions of foreign persons under
the criminal provisions of the Act have all taken place following guilty pleas
(ie: in cases in which jurisdiction was not contested). The extent of
territorial jurisdiction enjoyed under the Competition Act has thus yet
to be put to the test.[1]
26. To what extent are the
actions of foreign citizens or organizations covered by your competition laws
for actions that take place inside your borders?
Acts by foreign citizens inside
Canada are subject to the Competition Act.
27. To what extent are the
actions of foreign citizens or organizations covered by your competition laws
for actions that take place outside your borders but affect markets within your
borders?
Please refer to the discussion
in question 25 of the territorial scope of Canada’s competition law.
28. To what extent are the
actions of foreign citizens or organizations covered by your competition laws
for actions that take place outside your borders but affect exporters from your
country?
Please refer to the discussion
in question 25 of the territorial scope of Canada’s competition law.
ENFORCEMENT AND REMEDIES
Mode of Operation
29. Which of the following best
describes your approach?
- we tend to prohibit specified
anti-competitive activities
- we tend to take administrative
action to prevent abuses
Rather than separate the two, or
prefer one over the other, the Bureau tends both to prohibit specified
anti-competitive activities and take administrative action to prevent abuse.
Sanctions
30A What is the maximum fine
chargeable for the various offences against your competition law?
Penalties for the criminal
offences under the Competition Act include fines or imprisonment or
both. The maximum penalty for violating the conspiracy provision of the Act
(s.45) is a fine of ten million dollars, or five years imprisonment or both.
The penalty applicable to implementing a foreign directive in contravention of
section 45 (s.46) is a fine at the discretion of the court (since it only
applies to companies). The practices of bid-rigging (s.47) and conspiracies
relating to professional sports (s.48) each carry a maximum penalty of five
years imprisonment or a fine at the discretion of the court. Conspiracies among
financial institutions (s.49) carry the same maximum penalty as the general
conspiracy provision. The illegal trade practices under section 50 (price
discrimination and predatory pricing) carry maximum penalties of two years in
prison. Section 51 which relates to the granting of an allowance to any
purchaser that is not offered on proportionate terms to other competing
purchasers carries a maximum penalty of two years imprisonment. Section 52
which prohibits false or misleading representation carries a maximum penalty of
five years or a fine at the discretion of the court. The telemarketing
provision of the Act (s.52.1) carries the same maximum penalty. Double
ticketing (s.54) carries a maximum penalty of one year in prison or a ten
thousand dollar fine. Sections 55 and 55.1 (relating to multi-level marketing
plans and schemes of pyramid selling - see the answer to question 9 above)
carry maximum penalties of five years imprisonment or a fine at the discretion
of the court. Price maintenance (s.61) carries a maximum penalty of five years
imprisonment or a fine at the discretion of the court.
30B Are there any other criminal
penalties, including imprisonment, available for offences against the
competition law?
Yes. See the answer to question
30A above.
30C Does the competition agency
have the power to order restitution or payment of damages to affected parties?
The Competition Bureau itself
has no such power, although private parties are free to initiate actions under
section 36(1) of the Act for loss or damage suffered as a result of
conduct contrary to any of the criminal provisions of the Act or the
failure of any person to comply with an order of the Tribunal or another court
under the Act.
30D Does the legislation provide
for orders to be made by government or other bodies to prevent repeat
contraventions?
Section 34(1) provides that upon
a conviction under one of the criminal provisions of the Competition Act, the
courts may issue an order prohibiting the continuation or repetition of the
offence or prohibiting the doing of any act or thing that is directed toward
the continuation or repetition of the offence.
Section 35(1) provides further
that where any person is convicted of one of the criminal offences under the Act,
the court before whom the person was convicted and sentenced may from time to
time require the provision of information with respect to the business of that
person as the court deems advisable and may require full disclosure of all
transactions, operations, activities, contracts, agreements or arrangements.
30E What other penalties or
sanctions are available?
For a discussion of the various
special remedies available to courts under Part IV of the Competition Act,
please refer to the answer to question 2C.
Private Parties
31A Do private parties have the
right to take action against prohibited activities in the absence of action by
the enforcement agency?
Section 9(1) of the Act
entitles private parties to apply to the Commissioner for an inquiry where they
are of the opinion that a court or Tribunal order has been contravened, that
grounds exist for the making of a Tribunal order or that a criminal offence
under the Competition Act has been committed.
Section 10(2) obliges the
Commissioner to inform applicants under section 9(1) as to the progress of the
inquiry.
Please refer also to the answer
to question 30C above for a discussion of section 36.
31B What damages and remedies
are available to private parties?
Please refer to the answer
immediately above. Under section 36(1), a private party can recover an amount
equal to the loss or damage suffered by him, together with any additional
amount that the court may allow not exceeding the full cost of investigation of
the matter and proceedings.
31C Can private parties seek
orders to prevent contravention?
Strictly speaking, a private
party in an action under the Competition Act is limited to the relief
available under the Act - to an amount equal to the loss or damage
proved to have been suffered by him together with any additional amount that he
court may allow.
That said, however, plaintiffs
also have common law forms of relief; a plaintiff pleading a civil action based
on common law conspiracy may request injunctive relief and general damages as
well.
Foreign Complainants
32. Are there any restrictions
or special limitations where the complainant is not domestically based?
Section 9(1) of the Act
mentioned above, which allows private persons to request an inquiry of the
Commissioner of Competition, limits enjoyment of the right to any six persons resident
in Canada (emphasis added). Any six Canadian residents could submit a
section 9(1) application on behalf of a non-resident.
33. Are there any restrictions
or special limitations where the complainant is a foreign government?
See the answer immediately
above.
While the Competition Bureau is
not obliged to act on complaints from foreign governments, procedures have been
set up for situations in which the complainant is a foreign government. The Bureau maintains bilateral
relations with antitrust agencies in several foreign countries. These are
generally carried out within the framework of the 1986 Organization for
Economic Cooperation and Development (OECD) Council Recommendation concerning
cooperation between member countries on restrictive business practices. Under this Recommendation, countries
are to notify and consult with one another whenever the restrictive business
practices of one member may affect the important national interest of another.
Canada has signed an antitrust
cooperation agreement with the United States in 1995 that provides detailed notification procedures and
contains numerous notification requirements. The Agreement provides inter
alia that a party may request of the other party that its competition
authority initiate appropriate enforcement activities where the requesting
party believes that anticompetitive activities occurring in the territory of
the second party adversely affect its interests. The ultimate decision whether
or not to initiate enforcement proceedings is at the discretion of the second
party. Canada has initialled a similar agreement with the European Communities,
which contains the same provision.
Canada and the United States are
also parties to a Mutual Legal Assistance Treaty (commonly referred to
as the MLAT) which provides a mechanism for cooperation in investigating
indictable offences. The range of activities can include assisting in the
execution of search warrants at premises in Canada, reviewing and providing documentary
and other evidence leading to the initiation of grand jury investigations in
the United States and requesting the Antitrust Division of the US Department of
Justice to obtain documentary evidence from US corporate offices by compulsory
procedures.
[1]For an in-depth discussion of the
issue of extraterritoriality under Canadian competition law, please refer to
Davies, Ward & Beck Competition Law of Canada [Matthew Bender] 13
(1).