On March 22, 2012 the Canadian Competition Bureau released revised Draft Enforcement Guidelines on the Abuse of Dominance Provisions of the Competition Act (the "New Draft Guidelines"1). The New Draft Guidelines provide a summary of the Competition Bureau's approach to the enforcement of the abuse of dominant market position (or 'monopolization') regime. The most significant differences between the existing guidelines which were issued in 2001 (the "2001 Guidelines"), the 2009 Draft Guidelines, which were never finalized, and the New Draft Guidelines are summarized below.
- Necessary Intent: The most important
development in the New Draft Guidelines is the Bureau's changed
interpretation of the intent necessary to find that conduct
constitutes an anti-competitive act, and therefore can be the basis
for finding of abuse of dominant market position. The jurisprudence
has been unanimous that, to constitute an anti-competitive act,
conduct must be undertaken with the goal of having a negative
effect on a competitor which is predatory, exclusionary or
disciplinary. However, the New Draft Guidelines state that
"While many types of anti-competitive conduct may be intended
to harm competitors, the Bureau considers that certain acts not
specifically directed at competitors could still be considered to
have an anti-competitive purpose". This approach, if adopted,
will greatly expand the scope for finding that conduct constitutes
an Abuse of Dominance.
- Joint Abuse of Dominance: The 2001
Guidelines expressly stated that mere conscious parallelism
was insufficient to found a joint abuse of dominance case, but the
2009 Draft Guidelines removed that provision. The New
Draft Guidelines confirm the shift and go further, indicating
that firms may be found to hold market power as a group based on:
collective market share; barriers to entry or expansion; evidence
of a lack of inter-firm competition; and "other relevant
factors". Co-ordinated behaviour between those alleged to be
jointly dominant is not necessary to find joint dominance. This
approach will make it very difficult to know when firms will be
viewed as jointly dominant.
- Market Share Thresholds: The New Draft
Guidelines maintain the historic 35% market share "safe
harbour". They also indicate that, while a firm with a market
share of between 35% and 50% could be examined by the Bureau,
depending upon the circumstances, there will be no presumption of
dominance below 50% market share. This change is consistent with
jurisprudence and suggests that the Bureau is now less likely than
to focus on firms with market shares below 50%.
- Substantial Lessening of Competition and Sufficient
Remaining Competition: The New Draft Guidelines
indicate that the focus in deciding whether there has been a
"substantial lessening or prevention of competition" as a
result of anti-competitive conduct requires an assessment of the
relative decrease in competition in the market as a result of the
conduct, not a consideration of the overall competitiveness of the
market. As a result, it is at least theoretically possible for
conduct that results in a "substantial" lessening of
competition to be challenged, even when the market in issue
continues to be characterized by a significant level of competition
in absolute terms.
- Administrative Monetary Penalties:
Historically, a finding of abuse of dominant market position did
not give rise to fines or civil damages. In March 2009,
administrative monetary penalties (a maximum of $10 million, or $15
million for repeat conduct) were introduced. There is not yet any
jurisprudence regarding the imposition of such penalties. It would
have been helpful to have guidance on when and what level of
administrative monetary penalties would be sought by the
Commissioner, but the New Draft Guidelines are silent on
this important issue.
- Less is Less: The New Draft Guidelines offer much less guidance , by way of examples and analyses of types of anti-competitive conduct, than did the 2009 Draft Guidelines and the 2001 Guidelines. This will be a controversial development since guidelines are most useful in articulating enforcement approaches where jurisprudence is not available, and the extensive discussion of these issues in the 2009 Draft Guidelines was praised by commentators.
The New Draft Guidelines arrive on the heels of significantly enhanced enforcement efforts by the Competition Bureau. Between 2000-2008, only a single abuse of dominance case was filed. Since mid-2009 the Bureau has filed a Consent Agreement settling a matter involving joint abuse of dominance in the waste business; brought an abuse of dominance case against the Canadian Real Estate Association which was subsequently settled; and is pursuing an abuse case against the Toronto Real Estate Board. The Bureau is also litigating a case against Visa and MasterCard under the price maintenance provisions of the Act that is similar in many respects to an abuse of dominance case. Thus, the issues addressed in the New Draft Guidelines case are of significant practical, as well as policy, importance.
Those interested in commenting on the current Draft Guidelines are to submit their views in writing to the Competition Bureau by May 22, 2012.
Footnotes
1 The New Draft Guidelines are available on the Competition Bureau's website at www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03445.html.
The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.
The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.
© Copyright 2012 McMillan LLP
© Copyright 2012 McMillan LLP
