BUREAU'S NEW PRICE MAINTENANCE ENFORCEMENT GUIDELINES
On September 15, 2014, the Competition Bureau (Bureau) published
its Price Maintenance Enforcement
Guidelines (Guidelines). These Guidelines describe the
Bureau's approach to enforcing section 76 of the
Competition Act (Act), a civil provision focused on
conduct that influences the price at which a downstream supplier
sells its products and which has an adverse effect on competition.
The Guidelines are non-binding on the Bureau but nevertheless
provide important clarity for companies operating in Canada as to
how the Bureau will apply the Act to a number of common
The Guidelines suggest a conservative approach to section 76 but
have regard to a number of important economic concepts. For
example, the Guidelines recognize that the existence of
"market power" is a "key factor" in determining
whether conduct is capable of having an adverse effect on
competition. By further example, the Guidelines recognize that
– depending upon the circumstances – resale price
maintenance and other distribution practices are capable of
enhancing inter-brand competition and expanding output.
BUREAU'S ANALYTICAL APPROACH TO RETAIL MERGERS
On September 15, 2014, the Bureau's T.D. MacDonald Chair in
Industrial Economics, Renée Duplantis, published a white paper that describes the economic tools
and techniques the Bureau uses when analyzing retail mergers. While
the white paper is concerned most directly with the retail sector,
the tools and techniques described in it – particularly as
they concern the assessment of market power – can be equally
useful when analyzing mergers in other industries if the necessary
data are available.
The white paper is consistent with the approach that the Bureau
has adopted in its review of prior retail mergers. For example, the
white paper describes an approach to product and geographic market
definition that focuses on store format and
"bricks-and-mortar"/local competition; the white paper
does not discuss how sales of consumer goods made over the Internet
or national pricing/price-matching strategies could affect the
Bureau's analysis. By further example, the white paper
describes the types of analyses the Bureau might undertake when
testing for the existence of market power, including empirical
examination of natural experiments, upward price pressure analyses
(as a screen) and the construction of merger simulation models. The
white paper also describes how the Bureau will assess the monopsony
power of retailers over their suppliers, including testing for the
existence of the so-called "waterbed" effect where a
firm's exercise of bargaining power results in its rivals
paying higher prices for inputs – which could, at least in
theory if a number of assumptions are proven to exist – have
a negative effect on output.
While the Canada-China FIPA provides Canadian investors in China
and Chinese investors in Canada with numerous protections,
carve-outs ensure that the Canadian government can continue to
review (and condition or prohibit) investments in Canada by foreign
investors under the Investment Canada Act. The operation
of the Investment Canada Act is particularly important as
it concerns investments from Chinese firms since (i) investments by
Chinese state-owned enterprises have represented some of the
largest investments in Canada in recent years and (ii) there are
special rules under the Investment Canada Act that apply
to such state-owned enterprises. Observers are interested to see
what effect, if any, the Canada-China FIPA has on investment levels
between Canada and China.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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