Last year, provisions in the Canadian Competition Act
that permit the Competition Bureau to challenge anti-competitive
conduct by dominant firms that substantially prevents or lessens
competition were amended to allow for the imposition (by the
Competition Tribunal) of monetary penalties of up to C$10 million
for a first contravention. Where an abuse of dominance has been
established, the Tribunal can also issue injunctions or make other
orders necessary to restore competition. Only the Commissioner of
Competition, the head of the Competition Bureau, can bring an abuse
of dominance case to the Tribunal.
Prior to the recent amendments, civil courts in Canada had
consistently ruled that conduct alleged to constitute an abuse of
dominance was not an "unlawful" act that could form the
basis of a common law tort claim, such as unlawful interference
with economic interests. The courts ruled that, until and unless
such conduct was found by the Tribunal to be a violation of the
Act, it was not unlawful and therefore could not form the basis of
such a private action.
In a British Columbia civil proceeding, Novus Entertainment Inc.
alleged that a competing cable services provider had, among other
things, abused a dominant position by means of below-cost pricing.
Novus argued that the amendments to the Act permitting monetary
penalties for past conduct constituting an abuse of dominance meant
that Parliament changed the fundamental character of such conduct
so that it is now unlawful when it occurs.
However, in a ruling last month Mr. Justice Greyell of the
Supreme Court of British Columbia disagreed and struck the portion
of Novus' tort claim which was based on an alleged
contravention of the abuse of dominance provisions. Justice Greyell
ruled that the lawfulness or unlawfulness of a defendant's
conduct under the abuse of dominance provisions continues to remain
subject to a finding by the Tribunal. Until such a determination is
made by the Tribunal, it cannot be said that a defendant's
conduct is unlawful. The judge also pointed out that the Tribunal
may impose a monetary penalty only if it issues a remedial order
under the abuse of dominance provisions. However, the Tribunal
retains a discretion not to issue a remedial order even where
conduct within the scope of the abuse of dominance provisions of
the Act is established.
This ruling in the Novus case, if followed and upheld
on any appeal, should help to address concerns that the recent
amendments to the Act may chill pro-competitive competition by
potentially dominant firms. In many cases, particularly where
allegations of low pricing are raised, it can be difficult to
distinguish acceptable vigorous competition from conduct that may
be found to be abusive for the purposes of the Act. Accordingly,
some businesses could choose to price less aggressively rather than
risk multi-million dollar penalties and damage claims in private
actions. It remains to be seen whether and in what amount and
circumstances the Tribunal will issue monetary penalties for abuse
of dominance, but a reduced prospect of civil actions will help
provide Canadian businesses with greater confidence to compete
vigorously in their markets.
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guide to the subject matter. Specialist advice should be sought
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The Canadian Competition Bureau issued a template document for use as a form of Consent Agreement, to be filed with the Competition Tribunal to resolve concerns the Bureau may have with proposed mergers.
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