Canada: Abuse Of Dominance

The Competition Tribunal has been directed to reconsider key aspects of the Canada Pipe loyalty rebate case.

On 23 June 2006, the Federal Court of Appeal (FCA) issued a decision requiring the Competition Tribunal (the Tribunal) to redetermine aspects of the abuse of dominance and exclusive dealing application brought in October 2002 by the Commissioner of Competition (the Commissioner) against Canada Pipe Company Ltd.

The FCA’s decision is the first judicial consideration of the legal tests applicable in an abuse of dominance case (the exclusive dealing allegation was a secondary aspect of the Commissioner’s application and was dealt with summarily in the FCA’s decision). Although the FCA disagreed with the Tribunal’s analysis in part, the legal tests articulated by the FCA in its decision continue to underscore that loyalty rebates will only be found to contravene abuse of dominance law in Canada if they are demonstrated to lessen substantially or to prevent competition.


Canada Pipe manufactures cast iron drain, waste and vent (DWV) products. The Commissioner had alleged that Canada Pipe’s loyalty discount and rebate programme, known as the "stocking distributor program" or "SDP", contravened the abuse of dominance and exclusive dealing provisions of the Competition Act (the Act). The SDP offers distributors quarterly and annual rebates, as well as significant point-ofpurchase discounts, should they decide to purchase all of their cast iron DWV products from Canada Pipe.

After hearing from 27 industry witnesses and three experts over 30 days of testimony, the Tribunal dismissed the Commissioner’s application. Although it held that Canada Pipe was the dominant supplier in cast iron DWV markets across Canada, the Tribunal concluded that the SDP did not constitute a practice of "anticompetitive acts" and had not resulted in an actual or likely "substantial lessening or prevention of competition".

The Commissioner appealed against the Tribunal’s decision, arguing that the Tribunal had erred in law by applying the wrong tests to determine whether the SDP constituted an "anticompetitive act" and resulted in a "substantial lessening or prevention of competition" under the Act’s abuse of dominance provisions. Canada Pipe cross-appealed on the Tribunal’s definition of the relevant product market – Canada Pipe said it should not be limited to cast iron DWV products – and on the Tribunal’s finding that Canada Pipe had market power in the Canadian DWV industry (something that Canada Pipe denied).

The FCA’s Decision On The Commissioner’s Appeal

The FCA upheld the Commissioner’s appeal, agreeing with her position that the Tribunal had not applied the correct legal tests in assessing the "anticompetitive act" and "substantial lessening or prevention of competition" elements of abuse of dominance. It ordered that the case be reheard by the Tribunal on the basis of the tests articulated in its decision.

Anticompetitive Acts

In accordance with its previous case law, the Tribunal stated that conduct is anticompetitive if it has "an intended negative effect on a competitor that is predatory, exclusionary or disciplinary". Following this approach, whether or not an act is anticompetitive is determined by reference to its "purpose" or "overall character". This requires a consideration of all relevant factors, including the reasonably foreseeable effects of the act, any business justification and any evidence of subjective intent.

While acknowledging that the Tribunal had correctly identified the legal test for what constitutes an anticompetitive act, the FCA decided that the Tribunal’s subsequent analysis of the specific features of the test was "a cause for concern". According to the FCA, the Tribunal erred by assessing whether the SDP had a negative impact on the general state of competition in the market – for example, by considering if there had been a detrimental effect on consumers. The FCA held that the focus of the anticompetitive requirement should be exclusively on whether there is an intended negative effect on competitors; the impact on competition is properly addressed only at the final stage of the abuse of dominance analysis, when determining whether there has been a substantial lessening or prevention of competition. The FCA stressed that the structure of the abuse of dominance provisions requires that "each statutory element must give rise to a distinct legal test".

The FCA also questioned the Tribunal’s approach to Canada Pipe’s business justification for the SDP. The Tribunal had accepted Canada Pipe’s rationale for the SDP as a valid means of achieving the scale efficiencies necessary to maintain in inventory a full line of DWV products, which benefited distributors and consumers alike. According to the FCA, however, "improved consumer welfare is on its own insufficient to establish a valid business justification". In the FCA’s view, the Tribunal’s reasons had not established the "requisite efficiency-related link between the SDP and [Canada Pipe]", apparently because improved consumer welfare was not an objective that directly concerns Canada Pipe itself. The FCA did not elaborate further on what types of business justification might pass muster according to its new standard. However, by negative implication, the FCA’s reasons suggest that scale efficiencies and the competitive advantages they may bring – Canada Pipe is the only full line supplier of DWV products in Canada – cannot amount to a credible efficiency or procompetitive explanation for a particular course of conduct. In the circumstances, it is difficult to imagine a business justification that could satisfy the FCA’s test.

Substantial Prevention Or Lessening Of Competition

At the Tribunal, both parties relied on what had been the accepted test for assessing anticompetitive effects in abuse of dominance matters, namely whether, but for the anticompetitive acts, an effective competitor or group of competitors would emerge within a reasonable amount of time to challenge the dominance of the dominant firm. Based on this standard, the Tribunal concluded that effective competition had emerged to constrain (and in fact lower significantly) Canada Pipe’s pricing of its DWV products. Moreover, this competition had only emerged after Canada Pipe’s adoption of the SDP.

The FCA, however, held that a different "but for" test should be applied – one that asks whether "the relevant markets – in the past, present or future – [would] be substantially more competitive but for the impugned practice of anticompetitive acts". The FCA stated that the Tribunal erred by focusing on the mere fact of entry by competitors without asking whether there would have been significantly more competitive entry had the SDP never been implemented.

In a not overly helpful comment, the FCA stated that while its formulation of the "but for" test "is not necessarily the only correct approach", it is nonetheless "one that the Tribunal must consider in all cases – although it may in future cases choose to consider other appropriate tests as well". The FCA also refrained from setting out the appropriate methodology for applying its "but for" test, observing that this "is a matter for which the Tribunal is better qualified than this court". On the positive side, however, the FCA stressed that it remains the Commissioner’s burden to prove, on a balance of probabilities, that there has been a substantial prevention or lessening of competition, and that "the evidence required to meet this burden can only be determined by the Tribunal on a case-bycase basis".

Canada Pipe’s Cross-Appeal

Canada Pipe argued in its cross-appeal that the Tribunal should have recognised that the relevant product market included DWV products made from a variety of competing materials, including cast iron, plastic, copper and asbestos cement. With the market defined as such, Canada Pipe would have a share of no more than 10%, which would be insufficient to ground a finding of market power. In addition and in the alternative, Canada Pipe argued that the Tribunal had erred in concluding that Canada Pipe exercised market power in respect of the cast iron DWV market accepted by the Tribunal. Among other things, Canada Pipe argued that the Tribunal’s conclusion ran contrary to its clear finding of effective entry and competitive pricing in many markets.

The FCA was divided on Canada Pipe’s cross-appeal. The majority disposed of the cross-appeal summarily on the basis that the Tribunal’s findings as to product market and market power were "reasonable" and therefore immune from appellate intervention by reason of "curial deference".

In contrast, Pelletier JA would have overturned the Tribunal’s finding of market power in four of the six relevant geographic markets. The judge said that it was unreasonable for the Tribunal to conclude that Canada Pipe possessed market power in British Columbia, Alberta, the Prairies and Ontario, because the Tribunal had found that prices for cast iron DWV were competitive in those markets due to effective entry by new competitors. In Pelletier JA’s view, "the fact of reducing prices to respond to the emergence of new competitors" was inconsistent with a finding of market power.


The FCA’s decision marks the first time that a Canadian court has considered the Act’s abuse of dominance provisions. Although the FCA claimed that its decision was largely consistent with the Tribunal’s existing jurisprudence, its analytic departures stand to generate their own difficulties. This is particularly so in respect of the FCA’s standard for establishing legitimate business justifications, which appears to be almost impossible to meet. The FCA also introduced a new measure of uncertainty by stating that the Tribunal must take into account all of the objectives in the Act’s purpose clause when applying the Court’s "but for" analysis of whether a practice of anticompetitive acts has substantially lessened or prevented competition. Unfortunately, the Act’s purpose clause consists of a variety of disparate – and even inconsistent – objectives and the FCA did not elaborate on how the Tribunal is to incorporate (and reconcile) these objectives in its analysis.

The FCA’s decision is notable too for the almost microscopic dissection of the way in which the Tribunal structured its analysis. For example, while there may be some conceptual justification for stressing the need for distinct legal tests at each stage of the abuse of dominance analysis, the inescapable fact (which even the FCA acknowledged) is that the same evidence will be relevant to more than one element of proof. One may ask therefore if the FCA’s decision serves the interests of justice and expedition or if its differences with the Tribunal are merely a question of semantics. Moreover, a more interventionist approach by the FCA could well heighten already existing concerns about the formality, expense and delay of competition litigation in Canada.

Although it upheld the Commissioner's appeal of the Tribunal's legal analysis, the FCA declined to accept the Commissioner's suggestion that it should also decide the case on the merits. Instead, the FCA ordered the matter back to the Tribunal for redetermination based on the legal tests articulated in its decision. That redetermination will have to wait for the moment, however, as Canada Pipe has announced that it will be seeking leave to appeal the FCA's decision to the Supreme Court of Canada. The Court is not expected to rule on this application until 2007.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Mark C. Katz
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.