Canada: The Sherman Act Section 1 - Canadian Developments

Originally published in ABA Sherman Act Section 1 Newsletter (Fall 2006/Winter 2007)

Competition Bureau Concludes Examination of Gasoline Prices in Canada Following Hurricane Katrina

Following a thorough examination of the Canadian gasoline industry, the Canadian Competition Bureau (the "Bureau") announced on March 30, 2006 that it had found no evidence to suggest that an unprecedented spike in gasoline prices in Canada following Hurricane Katrina resulted from a conspiracy among North American gasoline refiners. Instead, the Bureau found that the primary reasons for the price shock were uncertainty over supply caused by a lack of data immediately following Hurricane Katrina, the closure of several refineries in the Gulf Coast region, and damage to pipelines that supply oil from the Gulf Coast to other refineries in the United States. In fact, the Energy Information Administration in the United States had previously concluded that 10% to 15% of total U.S. gasoline production was halted as a result of the hurricane.

According to the Bureau: "[t]he supply interruption broke down the normal relationship between crude [which accounts for approximately 75% of the pre-tax price of gasoline] and wholesale prices. With a lack of refined product available to North America, prices increased dramatically even though the cost of crude did not change. Price increases are a normal outcome when supply is reduced and demand remains constant. Market forces increase the price in response to a shortage of gasoline."

In addition, the Bureau noted that "[t]he supply reduction caused a spike in the New York Harbour spot price for gasoline, which Canadian refiners use to determine their wholesale prices. This spike forced wholesale, and ultimately retail prices, to increase in Canada and the United States.

The Bureau has now completed six major investigations of the gasoline industry in Canada since 1990. In each case, the Bureau found no evidence to suggest that periodic price increases resulted from a conspiracy to limit competition in gasoline supply.1

Continued Focus On Cartels

On September 28, 2006, Sheridan Scott the Commissioner of Competition (the "Commissioner"), delivered a speech in which she outlined her priorities and plans for the Bureau. Not surprisingly, the Bureau's top enforcement priority continues to be fighting cartels, particularly domestic cartels. To that end, the Bureau's budget for cartel investigations has been increased by approximately 50 percent over the last three years and the investigative capacities of the Bureau's regional offices have been strengthened.

The Bureau's focus on domestic cartels in 2006 began with three distributors pleading guilty to a conspiracy involving the distribution of carbonless sheets in Ontario and Québec. As part of the plea arrangement with the Bureau, the parties agreed to pay fines totalling Cdn.$37.5 million and to remove certain key personnel from their positions.

The Bureau also executed a number of search warrants as part of its investigation of alleged price fixing between competitors in the retail gasoline industry in local markets in the province of Quebec. Similarly, the Bureau executed a number of search warrants as part of its investigation of alleged anticompetitive practices by certain companies in the tour operators industry in Canada. These investigations are ongoing.

More recently, however, the Bureau had a case dismissed at the preliminary inquiry stage, when it failed to satisfy the presiding judge that the arrangement in question (which involved taxi companies in St. John's, Newfoundland agreeing not to bid on contracts put up for tender) had the effect of unduly preventing or lessening competition.

The Bureau's poor track record in litigating cartel cases in recent years (as exemplified by this most recent setback) led it at one point to support proposed amendments to Canada's conspiracy laws that would have eliminated the requirement to prove an "undue" prevention or lessening of competition. This proposal was shelved because it could not generate sufficient consensus. However, according to the Commissioner, the Bureau is continuing to review possible amendment options and hopes to commence public "technical roundtables" on the topic next year.2

Competition Bureau Concludes Examination of Gasoline Prices in Canada Following Hurricane Katrina

In response to questions from the media, the Commissioner confirmed on June 2, 2006 that the Bureau is investigating alleged price fixing between competitors in the retail gasoline industry in local markets in the Province of Québec. As part of its investigation, the Bureau has obtained search warrants from the Superior Court of Quebec against a number of participants in the gasoline industry on the basis "that there are reasonable grounds to believe that price fixing has occurred".

According to the statement issued by the Commissioner, "[t]here is no conclusion of wrongdoing at this time and no charges have been laid. All evidence will be analyzed and we will refer the case to the Attorney General if appropriate." The Commissioner also stated that "[o]ur enforcement record clearly shows that the Bureau is committed to investigate complaints in the petroleum industry and in all sectors of the Canadian marketplace and to take enforcement action under the criminal provisions of the Competition Act whenever appropriate".3

Recent Developments in Canada's "Regulated Conduct Defence"

The "regulated conduct defence" ("RCD") is a common law doctrine applied in Canada that provides a form of immunity from enforcement action under the Competition Act (Canada) (the "Act") to persons engaged in conduct that is directed or authorized by other validly enacted federal, provincial or municipal legislation. The RCD is analogous to the "state action doctrine" developed by the United States Supreme Court.

The Bureau's Information Bulletin on the RCD, first released in December 2002, was criticized for being inconsistent with existing case law. In October 2004, the Bureau began consultations on the role of the RCD in the application of Canada's competition law. On November 1, 2005, the Bureau released a draft Technical Bulletin on "Regulated Conduct" (the "Draft Bulletin"), which replaced the Bureau's 2002 Information Bulletin on the subject. A revised Technical Bulletin on Regulated Conduct (the "Bulletin") was recently released on June 29, 2006.

The Bulletin, substantially unchanged from the Draft Bulletin, represents an attempt by the Bureau to address the criticisms that the Information Bulletin ignored the body of case law that formed the basis for the RCD.

The key points made in the Bulletin are as follows:

Absent further judicial guidance, cautious application of the RCD is warranted.

In determining whether the RCD applies, the Bureau will carefully consider: (i) the purposes and relevant provisions of the Act and the applicable federal, provincial or municipal law; (ii) the interests sought to be protected by both laws; (iii) the impugned conduct; (iv) the parties involved; and (v) the applicable principles of statutory interpretation.

In the case of validly enacted federal legislation, the Bureau will apply the Act unless the Bureau can confidently determine that Parliament intended that the other legislation prevail over the Act – either by clear language in the Act or by the other federal law authorizing or requiring the particular conduct or, more generally, providing an exhaustive statement of the law concerning a matter. The Bureau will not pursue a matter where Parliament has articulated an intention to displace competition law enforcement by establishing a comprehensive regulatory regime that: (i) gives a regulator the authority to take action inconsistent with the Act; and (ii) the regulator has exercised its regulatory authority in respect of the conduct in question. Where the regulator has forborne from regulation, the Bureau will continue to apply the Act to such unregulated conduct.

In the case of validly enacted provincial legislation, the Bureau will consider whether a provincial law authorizes (expressly or impliedly) or requires the impugned conduct.

The Bureau will not necessarily approach the application of the reviewable matters provisions of the Act to conduct regulated by provincial law in the same manner as it will approach the application of the criminal provisions of the Act to such conduct. It is unlikely that the Bureau will pursue a case under any criminal provisions of the Act in respect of conduct that is authorized or required by a valid law. However, the Bureau will not refrain from pursuing regulated conduct under the reviewable matters provisions simply because the provincial law may be interpreted as authorizing the conduct or is more specific than the Act.

With respect to the criminal provisions of the Act, the Bureau will follow the Supreme Court of Canada's decision in Garland v. Consumers' Gas Co. in distinguishing between criminal provisions of the Act that contain "leeway language" (such as, "against the interests of the public" or "unduly limiting competition") and those which do not. Accordingly, the Bureau will refrain from investigating/prosecuting conspiracies under section 45 of the Act in appropriate circumstances because conduct authorized or required by provincial legislation cannot be "undue". With respect to other criminal provisions in the Act, the Bureau will attempt to determine whether Parliament intended that the particular provision(s) of the Act apply to the impugned conduct.

With respect to the reviewable matters provisions of the Act, there is simply not enough case law for the Bureau to limit its statutory mandate by the application of the RCD without further judicial guidance.

The Bureau acknowledges that no court has expressly held that the RCD should be applied differently as between regulators and regulatees. However, the Bureau nevertheless provides that greater scrutiny of the activities of regulatees, whether acting in their private capacity or as selfregulators, may be warranted.

Even if the Bureau decides that the RCD does not apply, it will consider the public interest in pursuing the matter.4

Competition Bureau Obtains Prohibition Order Against Sotheby's

On August 28, 2006, the Federal Court of Canada issued a Prohibition Order against the international auction house, Sotheby's, and its Canadian subsidiary, Sotheby's (Canada) Inc. ("Sotheby's Canada") following an investigation by the Bureau into an international pricefixing conspiracy and its effects on auction services supplied to Canadian clients.

The Bureau's inquiry concerned an international conspiracy to suppress and eliminate competition by fixing auction commission rates, and the effects that this conspiracy may have had on Canadian auction sellers between April 1993 and February 2000. In this regard, as a result of its inquiry, the Bureau determined that Canadians may have been induced by Sotheby's and Sotheby's Canada to consign their property to auctions in the U.S. and elsewhere for sales subject to the fixed commission rates set by the illegal cartel. No evidence was uncovered that the conspiracy affected auctions held in Canada.

The Prohibition Order prohibits Sotheby's, headquartered in New York, and Sotheby's Canada, based in Toronto, from committing any offense contrary to the conspiracy and foreign directives provisions of the Act. The Prohibition Order also prohibits Sotheby's and Sotheby's Canada from doing any act or thing directed toward the commission of an offense under such provisions, and directs them to maintain and implement compliance measures that will prevent any such future illegal activities. In addition, Sotheby's is required to post a notice of the Prohibition Order on its Canadian web page, and both companies are required to (a) provide a copy of the Prohibition Order to each of their directors, officers and employees responsible for the distribution, marketing and supply of services to Canadian auction sellers in relation to auctions held outside Canada; (b) provide a written statement to such individuals that it is company policy to require compliance with the Prohibition Order and that failure to comply could result in, among other things, appropriate disciplinary action that may include termination; and (c) pay investigative costs, calculated by the Bureau at just under Cdn.$800,000.

According to the News Release issued by the Bureau, "[t]he Court's Order addresses the Bureau's concerns that Canadian vendors benefit from competitive prices for international auction services. The Bureau's investigation focused on the harm this international conspiracy inflicted on Canadians."5


1 References: Competition Bureau, News Release, "Competition Bureau Concludes Gasoline Pricing Examinations" (30 March 2006); Competition Bureau, Backgrounder, "Competition Bureau Concludes Examination Into Gasoline Price Spike Following Hurricane Katrina" (30 March 2006)

2 Reference: Sheridan Scott, Speaking Notes (Address to the Canadian Bar Association Annual Fall Conference on Competition Law, 28 September 2006).

3 References: Competition Bureau, Statement by Sheridan Scott, Commissioner of Competition (2 June 2006).

4 References: Competition Bureau, Technical Bulletin on "Regulated" Conduct (June 2006).

5 References: Competition Bureau, News Release, "Competition Bureau Obtains Prohibition Order Against Sotheby's and Sotheby's (Canada) Inc." (28 August 2006); R. v. Sotheby's, No. T-1526-06, Statement of Admitted Facts, August 28, 2006 (F.C.T.D.); R. v. Sotheby's, supra, Prohibition Order, August 28, 2006.

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.

In association with
Related Topics
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions