Canada: 2010 Canadian Competition Law - Year in Review

Some of the most sweeping changes to Canada's Competition Act since the 1980s came into effect in 2010. As well, the implications of earlier amendments that came into effect in 2009 began to be felt throughout the past year. The new Commissioner of Competition, who took office in August 2009, ensured that relevant Competition Bureau policies were updated to reflect the new law, and demonstrated her willingness to pursue more aggressively anti-competitive conduct, challenging Canada's major national association of real estate agents, as well as credit card giants Visa and MasterCard.

Formal, fully-contested proceedings are rare under the Competition Act, and 2010 was no exception. Although the Commissioner did initiate several high-profile cases by filing complaints with the Competition Tribunal, one case settled. Another was filed in December 2010 so it remains to be seen whether the parties will fight or negotiate a settlement. Absent the direction provided by jurisprudence from contested cases, the Bureau has routinely issued policies and bulletins expressing its view of the manner in which the Competition Act should be applied in particular situations. The Bureau continued this practice in 2010, issuing a number of such documents and announcing a consultation process to assess the need to revise its merger review framework.

This survey will highlight the major legislative and policy developments in 2010, as well as the significant enforcement actions brought by the Commissioner in the principal areas of Canadian competition law.


(a) Legislative and Policy Developments

(i) New Legislative Provisions dealing with Agreements between Competitors

Amendments to the Act's criminal cartel provisions were passed in March 2009, but did not come into effect until March 12, 2010.1 These amendments made significant changes to the way that commercial agreements are analyzed and challenged by the Commissioner of Competition. Now that they are in effect, it is be easier for the Commissioner to bring criminal proceedings with regard to commercial agreements between competitors that fix prices, allocate markets or restrict production. The amendments make such agreements 'per se' illegal. Therefore, it is no longer be necessary for the Commissioner to prove that such agreements cause an undue lessening of competition.

In regard to other anti-competitive aspects of commercial agreements, the Commissioner has a new civil provision available to challenge agreements or arrangements that prevent or lessen competition substantially, or are likely to do so.

Companies that have commercial agreements in Canada with competitors or potential competitors should review those agreements in light of the new regime, given that there is no grandfathering for pre-March 12, 2010 agreements. Any company now entering such an agreement with one or more competitor will need to ensure that the agreements do not violate the Act. Care is especially warranted if the parties to the agreement have a combined Canadian market share of more than 35%, which is the usual threshold used by the Commissioner to determine market power. This threshold is often met relatively easily in Canada, due to the smaller number of competitors in Canadian product markets in comparison to countries with larger markets, such as the United States.

The new civil provision, Section 90.1, affects many common forms of commercial agreements and contracts. These include agreements to license intellectual property, research and development agreements, co-production agreements and agreements to settle litigation. Such agreements are also subject to section 45, but are rarely scrutinized under that criminal provision of the Act. However, the new civil provision in section 90.1 is likely to encourage the Commissioner to review these types of agreements.2

Summary of new regime

The amendments that came into effect in 2010 create a 'dual-track' approach to antitrust challenges to commercial agreements among competitors. Section 45 remains the 'criminal track', but its scope is now narrowed to focus only on so-called 'hardcore' cartel conduct. As noted above, the need for the prosecution to demonstrate an undue lessening of competition has been eliminated. This brings the section into line with the way that this conduct is treated in the United States. The 'civil track' is found in a new provision, Section 90.1, which empowers the Competition Tribunal to review agreements among competitors that deal with areas other than the three hardcore areas covered by Section 45.

Criminal track

Section 45 prohibits agreements between competitors that:

  • fix, maintain, increase or control the price for the supply of a product in respect of which the agreeing parties are competitors;
  • allocate sales, territories, customers or markets for the production or supply of the product; or
  • fix, maintain, control, prevent, lessen or eliminate the production or supply of the product.

The term 'competitor' is defined as including "a person who it is reasonable to believe would be likely to compete with respect to a product in the absence of a conspiracy, agreement or arrangement" described above. While it is no longer necessary to prove an undue lessening of competition, it is necessary to prove on a criminal standard that the parties involved are actual or likely competitors.

The amendments establish two statutory defences. The first defence is an 'ancillary restraints' defence, which applies where it can be established, on a balance of probabilities, that the agreement is (i) ancillary to a broader or separate agreement or arrangement that includes the same parties, and (ii) directly related to, and reasonably necessary for giving effect to, the objective of that broader or separate agreement or arrangement. The second defence is a 'regulated conduct' defence, which applies where another statute (federal or provincial) provides a defence to prosecution under Section 45.

The penalties for violating the new Section 45 are a maximum prison term of 14 years and a maximum fine of C$25 million. Parties may also be liable to private civil actions. Section 36 of the Act allows persons to bring an action for loss or damage caused by conduct that violates Section 45, regardless of whether criminal proceedings have been taken.

Civil track

Section 90.1 provides that agreements or proposed agreements between competitors (or those that would be competitors but for the agreement) can be reviewed by the Commissioner to determine whether they are likely to result in a substantial lessening or prevention of competition. If the Commissioner has concerns and the concerns are not satisfied by the parties voluntarily, the Commissioner can refer the matter to the Competition Tribunal for adjudication. If the Tribunal is satisfied that, on a balance of probabilities, the agreement is likely to result in a substantial lessening or prevention of competition, it may prohibit any person (whether a party to the agreement or not) from doing anything under the agreement, or may require any person (whether a party to the agreement or not), with the consent of that person and the Commissioner, to take any other action. These behavioural types of order are the only remedy that the Tribunal can impose; it cannot impose any monetary penalties. Private parties will be unable to bring private actions under the Act in respect of agreements that contravene Section 90.1.

In assessing whether an agreement or proposed agreement is likely to result in a substantial lessening or prevention of competition, the Tribunal will consider a prescribed list of factors that is identical to that used to assess proposed mergers.3 Likewise, there is an efficiency defence similar to that used in the merger context.4

IP licences

IP licences among competitors can be viewed as being pro-competitive as they can increase the number of suppliers of competing products in a market. However, if the licence agreement provides that the licensee/competitor must stop selling its own product, which is the only other competing product in the market, or must charge the same price for the only two products on the market, then liability for elimination of supply or price fixing might arise under Section 45. Section 90.1 may be invoked by the Commissioner where an IP licence to a competitor substantially lessens competition in a market by, for example, requiring the licensee to use the licensor's distribution network for all products sold by the licensee, including non-licensed products.

Therefore, parties to IP licences need to determine whether they have a significant market share in the relevant product market. If they do, they should ensure that (i) the licence agreement does not contain terms that would violate Section 45, and (ii) the agreement will not result in a substantial lessening or prevention of competition in the relevant product market contrary to Section 90.1.

Research and development agreements

The Competitor Collaboration Guidelines issued by the Commissioner note that research and development (R&D) can result in significant benefits. However, the guidelines identify various anti-competitive concerns. These include whether (i) an R&D agreement among competitors actually reduces the level of innovation that would have prevailed in the absence of the agreement, and (ii) anti-competitive restrictions are imposed in the agreement on the exploitation of the products that result from the R&D.

Given these concerns, it is important for competitors that are considering a joint R&D project agreement in Canada to include an analysis of whether the agreement raises issues that could result in the Commissioner taking enforcement action under the Act.

Co-production agreements

Like R&D agreements, the guidelines acknowledge that joint production agreements among competitors can be pro-competitive. The anti-competitive concerns focus on issues such as whether the joint production agreement limits output or fixes prices, or whether the agreement reduces the incentive or ability of competitors to continue to compete.

Companies that have or are considering co-production agreements with competitors in Canada need to ensure that the arrangement and agreements are structured and worded so as to avoid allegations of price fixing, supply reduction or that the agreement substantially lessens competition in some other manner. The defence that the joint production agreement enhances efficiency is available to justify co-production arrangements in certain circumstances. Accordingly, the efficiencies rationale should be part of any antitrust analysis of such agreements.

Agreements to settle litigation

Section 90.1 is broad enough to allow the Commissioner to make findings with respect to agreements to settle litigation. If, for example, a patentee and infringer were to settle a patent infringement action whereby the infringer agreed to stop marketing an infringing product, such an agreement could have the effect of preventing or lessening competition. On the other hand, the Patent Act gives a patentee the exclusive right, privilege and liberty to make, construct and use the invention and sell it to others to be used.5 The new powers provided by Section 90.1 could well have encouraged the Commissioner to scrutinize agreements to settle patent infringement actions in the pharmaceutical field, which is and has been an area of intense activity by the antitrust authorities in the US for many years, and more recently by EU competition authorities as well. However, in Canada, the Commissioner has indicated publicly that cases involving the nexus of competition law and intellectual property are not a current enforcement priority.6

(ii) Revised Leniency Program

In September 2010, the Bureau issued a bulletin detailing its Leniency Program, which serves to complement the Bureau's Immunity Program. The bulletin outlines the factors the Bureau considers when making sentencing recommendations to the Public Prosecution Service of Canada (PPSC) and the process for seeking a recommendation for a lenient sentence in criminal cartel cases. The bulletin is the product of several years' of consultation with the bar and other stakeholders.

The Bureau recommends immunity from prosecution for the first person to approach the Bureau who admits involvement in an offence and meets the immunity criteria. For those parties who are not "first in", provided they cooperate and meet the criteria of the leniency program, they are still eligible for lenient treatment. Whether the Bureau recommends lenient treatment in sentencing is based on the timeliness of the applicant's cooperation.

(b) Major Enforcement Actions

(i) Cartels

The Bureau regards combating domestic and international cartels as among its top priorities. In 2010, the Bureau secured a number of guilty pleas from parties involved in domestic and international cartels. Among the major investigations in 2010 were those related to air cargo, hermetically sealed compressors, hydrogen peroxide, and retail gasoline sales. The retail gas investigation is the largest criminal investigation ever undertaken by the Bureau, and it has thus far resulted in charges against 38 people and 14 companies. Ten people and six companies have pleaded guilty thus far.

(ii) Bid-Rigging

The Bureau had mixed success in a bid-rigging case regarding the supply of traffic signals to the City of Quebec. The Bureau secured a guilty plea from one party, which was fined $50,000 for its role in the alleged scheme. However, the competitor with whom this party allegedly bid-rigged, contested the charge and was successful at trial. The court acquitted Électroméga Limitée on the basis that it was not satisfied beyond a reasonable doubt that it had entered into the alleged agreement to rig the bid.7


(a) Legislative and Policy Developments

(i) Mergers

There were significant developments on the merger front in 2010, flowing largely from the 2009 amendments that conferred new document collection powers on the Commissioner and that changed the statutory waiting period. Entirely new review timeframes and a new pre-merger notification form have been adopted, and the Bureau announced in late February 2011 that it will undertake "moderate" revisions to its substantive merger review framework.8 There were no significant legislative or policy developments in other area of civil reviewable practices.

(1) Notifiable Transaction Regulations

Amendments to the Notifiable Transactions Regulations made under the Competition Act (the "Regulations") came into force on February 2, 2010. These amendments reflect the legislative amendments to the Competition Act which were passed in March, 2009. The amended Regulations create a uniform notification form for all transactions, modify the prescribed information that must be supplied to the Commissioner with a pre-merger notification filing, and stipulate how certain asset and revenue values are to be calculated for amalgamations.

The 2009 amendments had already created a single, thirty-day initial waiting period for all transactions (extendable by issuance of a "supplementary information request" or "SIR") and eliminated the choice between a 14-day or 42-day waiting period that had existed under the old regime. With the amended Regulations, the former distinction between a "short form" notification and a "long form" notification has been officially removed in favour of a single form prescribing information for all notifiable transactions. As a result, all transactions will now require the provision of certain information that previously was supplied only for "long form" notifications. The additional requirements are:

  • a copy of each legal document, or the most recent draft of that document if it is not yet executed, that is to be used to implement the proposed transaction; and
  • all studies, surveys, analyses and reports that were prepared or received by a senior officer for the purpose of evaluating or analyzing the proposed transaction with respect to market shares, competition, competitors, markets, potential for sales growth or expansion into new products or geographic regions and, if not otherwise set out in that document, the names and titles of the individuals who prepared the document and the date on which it was prepared. (In the United States, these types of documents are normally referred to as the "4(c) documents").

While the 2009 amendments also permit indexing of the C$70 million "size of transaction" threshold, the threshold remained unchanged at C$70 million for 2010, even though it could have been reduced in view of the slight decrease in Canadian GDP in 2009. The 2011 threshold has been set at C$73 million.

(2) Merger Policies

On October 22, 2010, the Bureau announced new service standard periods and complexity designations in its revised Fees and Service Standards Handbook for Mergers and Merger-Related Matters ("Merger Handbook"). In conjunction with the release of the Merger Handbook, the Bureau also issued an updated Fees and Service Standards Policy for Mergers and Merger-Related Matters ("Merger Policy") and a Procedures Guide for Notifiable Transactions and Advance Ruling Certificates under the Competition Act ("Procedures Guide"), which contain more technical changes aimed at ensuring that the Bureau's merger review process is in line with the amended merger provisions. Each of these updated policies took effect November 1, 2010.

Despite the existence of a statutory waiting period for notifiable transactions, the Bureau does not always complete its reviews within this period. In 1997, the Bureau developed non-binding "service standards" to provide guidance to merging parties as to the maximum time period within which it would complete a review. These periods varied with the complexity level of the transaction, as determined by the Bureau: "non-complex" transactions were reviewed within a maximum of 14 days, "complex" transactions within 10 weeks, and "very complex" transactions within five months.

Merger Handbook

The new Merger Handbook reduces the possible classifications of transactions to two, "non-complex" or "complex," with respective service standards of 14 days and 45 days. That is, the service standard for "complex" transactions is much shorter than before. In cases where a SIR is issued, the service standard will not be 45 days but will rather end 30 days from the date all responses to the SIR have been received by the Bureau. As such, that service standard will exactly correspond to the statutory waiting period provided for in the Competition Act. It should be noted that parties are legally entitled to complete their transactions upon the expiry of the statutory waiting period regardless of the status of the service standard period.

The Merger Handbook also provides more guidance on how mergers will be classified by the Bureau. Generally speaking, transactions that result in a combined market share of 10% or less will be classified as "non-complex"; transactions with combined shares of more than 35% will be "complex." Transactions with combined shares between 10% and 35% will be classified as "non-complex" or "complex," depending on a number of factors, including the barriers to entry, the number and effectiveness of remaining competitors, the existence of credible complaints or competitive concerns, the incremental increase in post-merger market share, and the challenges in defining the relevant product and geographic markets.

The Merger Handbook also outlines the type of information that the Bureau will consider sufficient to commence the service standard. Supplying this information at the time a notification or request for an advance ruling certificate ("ARC") is submitted will allow the Bureau to start both the waiting period and the service standard concurrently, and generally results in fewer, or more focused, subsequent information requests. One new element introduced in the Merger Handbook is that the service standard for ARC requests will now start on the day that sufficient information is received to classify the transaction, rather than the day after. This brings it in line with the treatment of pre-merger notifications.

Procedures Guide and Merger Policy

The Procedures Guide, which deals with how to determine whether a transaction is notifiable, the differences between a notification and an ARC, and filing procedures, adopts a new position on the timing of filings submitted electronically. Previously, the Bureau considered any filing made electronically before midnight to have been received that day; after November 1, 2010, any filing received after 5:00 pm will be deemed to have been received the following business day.

The Merger Policy confirms that filing fees for pre-merger notifications and written advisory opinions remain unchanged at C$50,000. In addition, the Merger Policy clarifies the Bureau's position regarding the payment of filing fees where notifications are withdrawn and resubmitted (so-called pull and refile). This is generally done to provide the Bureau with additional time to complete its review by restarting the waiting period and avoiding the issuance of a SIR. The Merger Policy provides that, where certain limited conditions are met, no additional filing fee will be required when a notification is pulled and refiled.

(3) Information Sharing in Hostile Transactions

In June 2010, the Bureau issued a bulletin clarifying its position on what information would be shared as between the parties to a hostile transaction. When a bidder in a hostile transaction submits a premerger notification, the Bureau is required to notify the target company immediately, which must then file a notification within 10 days. In practice, that is often the only information that the Bureau will provide to the target during the course of the review, as the Bureau is limited by the confidentiality obligations of the Act from disclosing much information. The Bureau's new approach will be handled on a case-by-case basis due to the complexities of hostile bids, particularly those involving competing bidders. Where certain information has been shared with one party, the Bureau will strive to disclose such information equitably to the other party.

The information that may be shared includes:

  • the complexity classification;
  • the anticipated timing of the review;
  • the date on which the other party has certified completion of any supplementary information request response;
  • the Bureau's preliminary and final views on matters such as market definition and barriers to entry; and
  • the Bureau's preliminary and final conclusions regarding a potential prevention or lessening of competition.

The Bureau will continue its policy of not disclosing confidential information such as customer and supplier information and other internal company documents that are contained in pre-merger notifications.

(b) Major Enforcement Actions

(i) Mergers

There were no contested merger cases referred to the Competition Tribunal in 2010. However, there were a number of cases in which the Bureau had sufficient concern that a settlement was reached between the Commissioner and the parties. The terms of such settlements are reflected in consent agreements registered with the Tribunal. Settlements were reached involving the following merger matters in 2010:

  • Ticketing services (Ticketmaster Entertainment, Inc. and Live Nation, Inc., January 2010);
  • Laser microdissection instruments (Danaher Corporation and MDS Inc., March 2010);
  • Commercial waste collection services (IESI-BFC Ltd. and Waste Services Inc., June 2010);
  • A herbicide ingredient (Nufarm Limited and AH Marks Holding Limited, July 2010);
  • Generic pain relief medications (Teva Pharmaceutical Industries Ltd. and the Merckle Group (ratiopharm), July 2010);
  • Ophthalmic products (Novartis AG and Alcon, Inc., August 2010); and
  • Carbonated soft drinks (The Coca-Cola Company and Coca-Cola Enterprises Inc., September 2010).

In late January 2011, the Commissioner filed an application before the Competition Tribunal to unwind a completed merger, the first contested merger case since 2005. This case will be watched closely in 2011.

(ii) Abuse of Dominance

On October 24, 2010, the Competition Bureau announced that the proposed settlement of its lengthy investigation into the practices of the Canadian Real Estate Association ("CREA") had been approved by CREA members. The following day, a consent agreement reflecting the terms of the settlement was registered with the Competition Tribunal. The Commissioner had commenced proceedings before the Tribunal in February 2010, and a hearing (expected to be very litigious in light of the sometimes acrimonious debate between the parties) had been scheduled for April 2011. The settlement eliminates the need for the hearing.

The Commissioner had alleged that the rules imposed by CREA on real estate agents who list properties on the Multiple Listing Service ("MLS") were anti-competitive. The Commissioner's notice of application alleged that CREA, "through its members, has substantial or complete control over the supply of residential real estate brokerage services throughout Canada; that CREA and its members have used CREA' s control of the MLS and related trademarks to impose exclusionary restrictions on their use; that CREA enacted these restrictions with the intent of having a negative exclusionary effect on real estate brokers and agents seeking to provide less than a full package of brokerage services; and that these restrictions lessen or prevent competition substantially in the market for residential real estate services in Canada."

The rules adopted by CREA, the Commissioner claimed, limited the choices available to Canadian home buyers and sellers, as they imposed minimum service requirements on all brokers. Under the settlement, CREA will eliminate its ability to adopt anti-competitive rules that discriminate against real estate agents hired to perform limited functions, such as merely posting a listing on MLS. The settlement will be in effect for 10 years.

The Commissioner initially filed the application with the Tribunal after three years of discussions and several months of negotiations with CREA. Although CREA offered to modify its rules following the filing of the application, the Commissioner was not satisfied with the proposed rule changes as they did not prevent CREA from making future rule changes that would undercut the proposed changes, and thus continued with the application.

Although it is disappointing that there will be no Tribunal decision to offer more guidance for future abuse of dominance cases, it is encouraging that this case is consistent with the Commissioner's pledge to not only launch cases when necessary, but to also settle them when appropriate. It is now expected that, with the settlement of the CREA case, the Bureau may reactivate the preparation and issuance of its updated Enforcement Guidelines on the Abuse of Dominance Provisions, which have been dormant for more than a year.

(iii) Price Maintenance

In December 2010, the Bureau announced that it had filed an application with the Tribunal to strike down the rules that Visa and MasterCard impose on merchants who accept their credit cards. The Commissioner alleges that these rules have effectively eliminated competition between Visa and MasterCard for merchants' acceptance of their credit cards, resulting in increased costs to businesses. Those costs, the Bureau alleges, are ultimately passed on to consumers in the form of higher prices.

The Bureau is challenging Visa and MasterCard's rules under the price maintenance provisions of the Competition Act. The Bureau launched its investigation in response to complaints by merchants and their associations and initiated a formal inquiry in April 2009. Visa and MasterCard operate the two largest credit card networks in Canada. Together they processed more than 90 percent of all credit card transactions by Canadian consumers in 2009, representing over $240 billion in purchases. The rules challenged by the Bureau prohibit merchants from encouraging consumers to consider lower cost payment options like cash or debit, and prohibit merchants from applying a surcharge to a purchase on a high cost card. Further, once a merchant agrees to accept one of Visa or MasterCard's credit cards, that merchant must accept all credit cards offered by that company, including cards that impose significant costs on merchants, such as premium cards.


The Competition Bureau released two enforcement bulletins in September 2010 to clarify its approach to compliance programs and the regulated conduct defence.

As set out above, Canada's Competition Act underwent significant changes in 2009 and 2010. The Bureau has already updated a number of its bulletins to reflect the new law, and September's releases are part of this process.

(a) Bulletin on Corporate Compliance Programs

Notwithstanding an increased focus on enforcement, voluntary compliance with the requirements of the Act remains a Bureau priority. The Bureau has thus made minor revisions to its 2008 bulletin on corporate compliance programs to reflect the recent amendments to the Act. These include: updating references to the criminal conspiracy provisions which now apply to agreements between competitors to fix prices, allocate markets or restrict output with no need to demonstrate an undue lessening of competition; increasing penalties for conspiracy, bid-rigging and misleading advertising; decriminalizing certain pricing practices; and adding significant administrative monetary penalties for abuse of dominance.

This revised bulletin reiterates the benefits of implementing a corporate compliance program as well as the Bureau's views on what makes a program credible and effective. Among the benefits of a compliance program are increased awareness of the Act's requirements and the Bureau's powers, thereby aiding in compliance with the law and reducing the risks of non-compliance. Compliance helps maintain a good corporate reputation, can reduce costs related to litigation and fines resulting from a Bureau investigation or court proceeding, and can help reduce exposure of employees, senior management and the corporation to criminal, civil or penal liability.

The Bureau considers a compliance program to be "credible and effective" if it is designed to prevent contravention of the Act, to detect inadvertent or unauthorized actions at an early stage, and to identify contraventions committed by others that affect the business. This is in contrast to what the bulletin refers to as "sham" policies, which are used to conceal or deflect liability. Where the Bureau finds evidence of a sham policy, it will be considered an aggravating factor for sentencing purposes or other form of resolution, including administrative monetary penalties.

The bulletin identifies five elements that the Bureau considers essential to a credible and effective compliance program:

  • senior management involvement and support;
  • corporate compliance policies and procedures;
  • training and education;
  • monitoring, auditing, and reporting mechanisms; and
  • consistent disciplinary procedures and incentives.

The release of the updated Corporate Compliance Programs bulletin reinforces the need for firms to revisit their own compliance programs or to consider implementing a program if they do not currently have one. With the recent amendments to the Act substantially increasing the penalties for criminal violations and adding the prospect of hefty monetary penalties for certain civil matters, compliance is more important than ever. And, more than ever, it is clear that such compliance programs can never be regarded as static documents. They must be regularly reviewed and audited, and corporate conduct and actions must be continually reviewed and assessed against these programs.

(b) Bulletin on Regulated Conduct

The Competition Bureau has also updated its bulletin on "regulated conduct." This bulletin outlines how the Bureau deals with conduct regulated by another federal, provincial or municipal law or legislative regime, but that may conflict with the Competition Act. These conflicts have given rise to what is known as the regulated conduct doctrine or regulated conduct defence ("RCD"), which effectively immunizes certain conduct from Bureau review on the basis that it was authorized or required by another validly enacted law.

In its initial guidance document, the Bureau took a cautious approach to the RCD, noting that the case law in the area is underdeveloped. The Bureau maintains this position in the updated bulletin. In determining whether to apply the Competition Act to conduct regulated by another scheme, the Bureau will consider the purpose of the Act and of the other applicable law, the interests meant to be protected by both laws, the conduct in question, the potentially applicable provisions of the Act, the identity of the parties involved, and the applicable principles of statutory interpretation. The Bureau will distinguish between laws passed by a provincial or territorial government and those passed by Parliament. Likewise, the Bureau will distinguish between conduct that is potentially subject to the criminal provisions of the Act and conduct that is subject to the civil provisions.

The recent amendments to the Competition Act specifically added a reference to the RCD in the revised criminal cartel provision. Section 45(7) of the Act now expressly provides that the RCD as it applied to section 45 prior to the 2009 amendments will continue to apply to the amended section 45. This is consistent with the approach taken in the Bureau's Competitor Collaboration Guidelines, issued in December 2009.

The Bureau will always consider whether the RCD applies to conduct that may be regulated by provincial law. It will examine whether a validly enacted provincial law authorizes or requires the conduct in question. Where this happens, the Bureau will not pursue a case under the criminal conspiracy provisions of the Act. When evaluating potential violations of other criminal provisions in the Act, the Bureau will begin by determining whether Parliament intended the particular Competition Act provision to apply to the conduct. If the answer is yes, the Bureau may nonetheless refrain from pursuing the case, relying on the RCD, other defences or doctrines, or the Bureau's discretion not to pursue an inquiry.

Regarding federal legislation that may conflict with the Act, the Bureau will strive to determine whether Parliament intended the statutes to operate harmoniously or whether it is impossible to comply with both statutes. The bulletin states that the Bureau will not pursue a matter under any provision of the Act where Parliament has expressed the intent to displace competition law enforcement by establishing a comprehensive regulatory regime and providing a regulator the authority to act (directly or indirectly) inconsistently with the Competition Act. This only applies where the regulator has exercised its regulatory authority in respect of the conduct in question.

Companies that operate in regulated industries should pay particular attention to these guidelines. As noted above, the Bureau views RCD case law as underdeveloped. Although this regulated conduct bulletin sets out a cautious approach to the RCD, the Bureau has also indicated that it will take into account both the regulatory context in which the conduct occurs and whether it is in the public interest to pursue the conduct under the Competition Act in the circumstances. The difficulty with this approach, of course, is it leads to a near complete lack of certainty as to how the RCD will be approached for practical, commercial conduct purposes. While a "test case" seems to be called for, it is unlikely that even a test case would provide universal guidance.

(c) Developments in Certification Standards in Canadian Competition Law Class Actions

The recent trend toward the certification of class actions relating to alleged cartel activity and other anti-competitive conduct continued in 2010, with new cases certified and certification decisions from 2009 affirmed on appeal.

Decisions from courts in B.C. and Ontario in late 2009 appear to have signalled a shift in the way Canadian courts will approach certification of price-fixing class actions against cartel defendants. On November 12, 2009, in Pro-Sys Consultants Ltd. v. Infineon Technologies AG,9 the British Columbia Court of Appeal reversed a lower court decision and certified a class proceeding involving allegations of a price-fixing conspiracy among producers of dynamic random access memory ("DRAM"), a memory chip used in computers and many other electronic devices. The Pro-Sys case was preceded by the decision handed down on September 28, 2009 by Justice Rady of the Ontario Superior Court of Justice in Irving Paper Limited et al. v. Atofina Chemicals et al.10 which certified a class proceeding involving allegations of price fixing among producers of hydrogen peroxide. These were the first class actions alleging a multilateral price-fixing conspiracy that had been certified in Canada when certification had been contested by the defendants. Until now, such cases had been certified as class actions only in the context of a consent certification in furtherance of a settlement.

The central allegation in both of these actions (and in similar actions) is that the defendant competitors entered into an unlawful agreement relating to the pricing or supply of a particular product which resulted in an increase in price (or "overcharge") paid by purchasers of the product over what would otherwise have been paid in a competitive market absent the unlawful agreement. The central claims in these types of actions are usually based on the tort of conspiracy and the civil liability provisions of the Competition Act. The proposed plaintiff class typically includes both direct purchasers of the product (those who purchased the product in unaltered form directly from one of the defendants) as well as indirect purchasers (those who purchased the product from direct purchasers or other indirect purchasers, often as a component of a further manufactured or processed good).

Prior to 2009, the problem plaintiffs had faced in the certification of these claims as class actions stemmed from the determination of how much, if any, of the overcharge paid by the direct purchasers was "passed through" from the direct purchaser down through the chain of distribution to the indirect purchasers. If the overcharge is absorbed entirely by a direct purchaser without any resulting increase in price paid by indirect purchasers, then those indirect purchasers have suffered no harm. Conversely, if the direct purchaser passed through the entire overcharge to the indirect purchasers, the direct purchaser has suffered no harm (assuming the increased prices do not result in a decrease in sales). As harm is a component of liability both in the tort of conspiracy and in related claims for damages under the civil liability provisions of the Competition Act, class members who have suffered no harm arguably have no actionable claim. This issue presents a problem in the class action context because the question of whether pass-through occurred and, accordingly, whether class members actually suffered harm, is not easily determinable on a class-wide basis.

The question of whether the existence of harm can be determined on a class-wide basis has been the focus of certification motions in price-fixing class actions in Canada, a battle typically fought through the evidence of expert economists. The plaintiff presents expert evidence in support of a proposed methodology for the class-wide determination of harm; the defendant files expert evidence in response contesting the viability of the plaintiff's proposed methodology and arguing that harm for any class member can only be determined by examining the existence and extent of pass-through over the entire chain of distribution in respect of each class member's transaction. Prior to the Pro-Sys and Irving Paper decisions, on contested certification motions in price-fixing class actions Canadian courts, including the Ontario Court of Appeal in Chadha v. Bayer,11 have generally held that the existence of harm (and therefore liability) cannot be determined on a class-wide basis and therefore these cases are unsuitable for certification as a class action.

Expert evidence on the class-wide determination of harm similar to the evidence discussed above was filed by the plaintiff and the defence in both the Pro-Sys and Irving Paper cases. The courts in these cases certified the class actions not because they rejected the defence expert evidence in favour of the plaintiff's, but because they appear to have applied a lower threshold for certification. Neither court required the plaintiff to demonstrate that the existence of harm could, in fact, be determined on a class-wide basis. In Pro-Sys, the B.C. Court of Appeal held that the plaintiff had met its evidentiary burden on certification if the proposed methodology for the class-wide determination of harm was merely "plausible" or "credible". In Irving Paper, Justice Rady held that she need only be satisfied that such a methodology "may" exist. Both courts held that it was inappropriate for the court to weigh and consider the expert evidence on this issue at the certification stage and that the viability of the plaintiff's proposed methodology was ultimately an issue for the class action trial judge.

The courts in both Pro-Sys and Irving Paper also relied on the provisions in the provincial class action statutes that provide for the use of statistical evidence to determine damages to the class in the aggregate. Both courts held that such statistical evidence could be employed not only to assess the total amount of the damages to the class but also to support a determination of liability, potentially avoiding the need to demonstrate harm to each class member on an individual basis. Following a recent certification decision of the Ontario Court of Appeal in Markson v. MBNA Bank,12 Justice Rady held that the plaintiff need only demonstrate "potential" liability to engage the aggregate assessment provisions in the legislation. Justice Rady further held that Markson effectively overruled the Court of Appeal's earlier decision in Chadha on this issue.

In 2010, the defendants in Pro-Sys sought leave to appeal that decision to the Supreme Court of Canada. Leave to appeal was denied without reasons.13 The defendants in Irving Paper also sought leave to appeal to the Ontario Divisional Court. In reasons released in June 2010, Justice Leitch of the Divisional Court held that Justice Rady had erred in holding that that Chadha had been overruled.14 However, she also held that Justice Rady had otherwise applied the correct test in certifying the action as a class proceeding on the basis that the evidence of the plaintiff's expert provided a "viable methodology for proving loss on a class-wide basis". Leave to appeal was therefore refused.

Pro-Sys was followed in British Columbia in 2010 by Sun-Rype v. Archer Daniels Midland,15 a class action based on allegations of price-fixing in the high fructose corn syrup market. Justice Rice of the B.C Supreme Court held that the plaintiffs' expert had demonstrated that there was a "plausible or credible" methodology for determining harm on a class-wide basis and certified the action.

Class actions relating to other alleged anti-competitive behaviour were also certified in 2010. In March 2010, Justice Myers of the B.C. Supreme Court certified a class action against Microsoft by indirect purchasers of its software based on allegations of abuse of dominance.16 As in the cartel class actions, the primary issue on certification was whether the harm allegedly passed through to the class members could be proven on a class-wide basis. Relying on the Court of Appeal's decision in Pro-Sys, Justice Myers found on the evidence that there was a "plausible methodology" for proving class-wide harm.

In June 2010 the Ontario Court of Appeal released its decision in 2038724 Ontario Ltd. v. Quizno's Canada Restaurant Corporation.17 This was a class action commenced on behalf of approximately 400 franchisees who claim that they were being overcharged for supplies that they were required to buy from sources designated by the defendant franchisor, contrary to section 61 of the Competition Act (the former criminal offence of price-maintenance). In addition to a claim for damages under the Competition Act, the franchisees alleged breach of contract and breach of duty of fair dealing under franchise legislation. Unlike the cartel class actions, Quizno's was a claim by direct purchasers only and did not involve the pass-through problem. Nevertheless, certification was denied at first instance on the basis that the question of damages - which was individual to each class member - overwhelmed the aspects of the litigation which were common to the class. In 2009, the Ontario Divisional Court allowed the plaintiff's appeal and certified the class action.18 The Divisional Court held that given the relatively small size of the class and the fact that pass-through was not an issue, harm could be determined on a class-wide basis. The Court also held that liability for breach of contract could be determined on a class-wide basis. The Court of Appeal agreed with the reasons of the Divisional Court and dismissed the defendants' appeal.

While these recent cases involve different fact situations and legal considerations, the decisions all have a similar underlying theme. The courts are increasingly reluctant to consider matters relating in any way to the underlying merits of the plaintiffs' claims at the certification stage, particularly when dealing with expert evidence. The recent decisions suggest that the plaintiff need not even demonstrate that they can prove their damages on a class-wide basis, merely that there is methodology for doing so that is at least "plausible". The courts have effectively postponed the determination of whether harm and pass-through can, in fact, be proven on a class-wide basis to the trial court. No competition class action has yet proceeded to trial in Canada. It remains to be seen how these issues will be dealt with in the future.

(d) Disclosure of Evidence in Private Actions

In a judgment handed down on October 4, 2010,19 the Quebec Superior Court approved a settlement agreement in which two defendants facing criminal charges relating to gas price-fixing will cooperate with the plaintiffs in a parallel class action. The settlement agreement involves two individual defendants (the "Defendants"), as well as three companies of which they are respectively an officer and a shareholder.

What is unusual about this agreement is that the Defendants will provide certain information about the other defendants involved in the cartel to the plaintiffs in the class action proceeding, including the contents of the Crown brief that was given to the Defendants to prepare their defence to the criminal proceedings.

The Cartel and the Class Action

In June 2008, following an investigation that lasted over four years, the Competition Bureau announced that it was laying charges relating to a gasoline cartel in Sherbrooke, Magog, Victoriaville and Thetford Mines20. The very next day, several class actions arising from these charges were instituted by consumers. On November 30, 2009, one of the class actions was authorized by Justice Bélanger against about 40 individuals and companies, on behalf of all persons who purchased gas at least once between January 1, 2002, and June 30, 2006, on the territory of the four municipalities.

In September 2010, the class action plaintiffs applied to the Court for approval of their settlement agreement with the Defendants, who had opted to plead guilty to criminal charges of conspiracy, unlike some of their co-defendants to the class action. In exchange for a release and discharge, and immunity in the civil proceedings, the Defendants agreed to cooperate fully with the plaintiffs to help them prepare their class action and their evidence against the remaining defendants.

Some of the other defendants, particularly those who did not plead guilty to the criminal charges, objected to the disclosure of the entire Crown brief obtained in the course of the criminal proceedings under the Competition Act. The Director of Public Prosecutions (who takes over from the Competition Bureau once criminal proceedings begin) also objected strongly to the disclosure of this information, alleging that the Defendants had given both express and implied undertakings to use the Crown brief only to prepare their defence to the criminal charges.

After a lengthy debate about the existence of an implied duty of confidentiality in Canada, the parties to the settlement and several of the defendants agreed that a process to screen the documents in the Crown brief should be put in place, following the example given by the Court of Appeal for Ontario in Wagg.21 The brief contained about 38,000 documents (over 250,000 pages), many of which, in the opinion of the Competition Bureau, may contain confidential information. The Crown brief also included about 5,900 wiretaps for which a specific objection was filed by the remaining defendants on constitutional grounds, challenging the legality of releasing the wiretaps in connection with a civil action.

Justice Bélanger pointed out that the results of the Competition Bureau's investigations are not Crown property, but the property of the public to be used to ensure that justice is done. Consequently, she expressed the opinion that the Director of Public Prosecutions should cooperate to implement a screening mechanism for the documents, with the exception of recordings from wiretaps, and that he could disclose to the plaintiffs all documents that he considers public or that do not include personal information of third parties. Justice Bélanger also held that documents whose disclosure could constitute an infringement on the privacy rights of third parties should be the subject of a separate agreement at a later date or, failing agreement, a court order.

Implications of This Decision

This decision does not completely settle the question of the possible voluntary disclosure by certain defendants of the Crown brief prepared in the course of criminal charges laid under the Competition Act against multiple defendants, but it constitutes a first step (at least in a settlement context). In addition, it confirms that screening mechanisms can be set up and that the Court can order the Director of Public Prosecutions to screen documents before they are disclosed to plaintiffs. The Court also noted that the fact that certain documents could be obtained in discovery was not a valid reason for disallowing their disclosure.

Justice Bélanger also emphasized that it was important for the Competition Bureau to be able to use informers and even whistleblowers and to reach agreements with them in criminal investigations against cartels. She appears to believe that plaintiffs in civil proceedings should be able to do the same.

Will this judgment encourage some parties facing criminal charges under the Competition Act to cooperate with plaintiffs in companion class actions and use the disclosure of the Crown brief as a bargaining chip in exchange for immunity? Only time will tell, but it could certainly offer an attractive way out for certain defendants and could also help the plaintiffs to the civil action prove their damages and the causal relationship with the price-fixing cartel. For the other defendants who have not yet pleaded guilty to the criminal charges, it could increase the risks entailed in the civil proceedings. In fact, just as the immunity program set up by the Competition Bureau has put an end to solidarity among co-accused in criminal cases, this decision may cause a similar weakening of solidarity among co-defendants in civil proceedings. Past experience with anti-competitive conduct suggests that there will always be one member of a cartel for whom the advantages of immunity justify cooperation with the Crown, or with the plaintiffs.

(e) Intellectual Property

There were no developments of note in regard to the interface between intellectual property law and competition law in 2010. The decade old Intellectual Property Enforcement Guidelines were not reviewed or updated by the Competition Bureau. There was also no new case law to add to the several cases that were decided in 2009, such as Servier v. Apotex Inc.22


1 Budget Implementation Act, S.C. 2009, c.2.

2 Speaking notes for (then) Interim Commissioner of Competition Melanie Aitken (May 13, 2009) can be found at .

3 Competition Act, Section 90.1(2).

4 Competition Act, Section 90.1(4).

5 Patent Act, Section 42.

6 Speaking notes for the Commissioner of Competition (September 30, 2010), available online at

7 R. v. Electromega ltée, 2010 QCCS 2283 (CanLII).

8 See Bureau Announces Plans to Revise the Merger Enforcement Guidelines (February 25, 2011), available online at .

9Pro-Sys Consultants Ltd. v. Infineon Technologies AG, 2009 BCCA 503 rev'g 2008 BCSC 575.

10 Irving Paper Ltd. v. Atofina Chemicals Inc., [2009] O.J. No. 4021 (Sup. Ct.) leave to appeal ref'd 2010 ONSC 2705 (Div. Ct.).

11 (2003), 63 O.R. (3d) 22 (C.A.), leave to appeal ref'd [2003] S.C.C.A. No. 106.

12 (2007), 85 O.R. (3d) 321 (C.A.). This was class action against a credit card company alleging illegal interest rates. It was not a competition law case.

13 [2010] S.C.C.A. No. 32.

14 Irving Paper Ltd. v. Atofina Chemicals Inc. 2010 ONSC 2705 (Div. Ct.) at paras. 39-51.

15 Sun-Rype Products Ltd. v. Archer Daniels Midland Co., 2010 BCSC 922.

16 Pro-Sys Consultants v. Microsoft Corp., 2010 BCSC 285.

17 2010 ONCA 466, leave to appeal ref'd [2010] S.C.C.A. No. 348.

18 2038724 Ontario Ltd v. Quizno's Canada Restaurant Corp. (2009), 96 O.R. (3d) 252 (Div. Ct.).

19 Jacques c. Pétroles Therrien inc. (October 4, 2010), Québec 200-06-000102-080 (C.S.).

20 See

21 D.P. v. Wagg, 2004 CanLII 39048 (ON C.A.).

22 (2008), 67 C.P.R. (4th) 241, 2008 FC 825, Snider J., aff'd 75 C.P.R. (4th) 443 (F.C.A.), leave to appeal to the S.C.C. denied (33357).

About Ogilvy Renault

Ogilvy Renault LLP is a full-service law firm with close to 450 lawyers and patent and trade-mark agents practicing in the areas of business, litigation, intellectual property, and employment and labour. Ogilvy Renault has offices in Montréal, Ottawa, Québec, Toronto, Calgary and London (England), and serves some of the largest and most successful corporations in Canada and in more than 120 countries worldwide. Find out more at

Ogilvy Renault joins Norton Rose Group on June 1, 2011.

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