Copyright 2009, Blake, Cassels & Graydon LLP
Originally published in Blakes Bulletin on Competition, Antitrust & Foreign Investment, January 2009
On January 16, 2009, the Canadian Competition Bureau released draft Abuse of Dominance Guidelines which, when finalized, will replace the current Abuse of Dominance Guidelines that were published in 2001. A copy of the draft Abuse Guidelines and the Competition Bureau's press release announcing them are available at: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02950.html . The Competition Bureau has invited interested persons to submit comments to it by April 20, 2009.
By way of background, under the abuse of dominance provisions of Canada's Competition Act (section 79), the Commissioner of Competition can apply to the Competition Tribunal for a prohibition or remedial order where the following conditions are met:
- One or more persons substantially or completely controls in Canada a class or species of business. This requirement has been held to require evidence that a dominant firm holds market power, namely the ability to profitably set prices above competitive levels for a considerable period of time, within a relevant market.
- The dominant firm (or dominant firms in the case of joint dominance) has engaged in a practice of anti-competitive act. This element requires evidence that the anti-competitive conduct is part of a "practice" rather than an isolated act and that the alleged conduct was adopted for an anti-competitive purpose that is "predatory, exclusionary or disciplinary". Importantly, the Competition Tribunal confirmed in the Canada Pipe case that valid business justifications can be considered for determining whether conduct was taken for the purpose or with the intent of harming competitors or for a credible efficiency or pro-competitive reason.
- The anti-competitive conduct has had, is having or is likely to have the effect of preventing or lessening competition substantially in a market. Essentially, this element requires evidence that the alleged anti-competitive act will "preserve or enhance the dominant firm's market power." In Canada Pipe, the Federal Court of Appeal confirmed that it is not relevant whether there will be sufficient competition in absolute terms. Instead, the test is whether there would have been substantially more competition but for the anti-competitive acts.
The draft Abuse Guidelines provide a summary of the relevant law, describe the Competition Bureau's enforcement approach and recent economic thinking. The draft Guidelines expand on the existing Abuse of Dominance Guidelines in a number of areas, including:
- Outlining the Bureau's approach to anti-competitive intent and valid business justifications. The draft Abuse Guidelines describe the Bureau's approach to determining the circumstances where it may accept "valid business justifications" as demonstrating that impugned conduct engaged in by a dominant firm was not adopted for an anti-competitive purpose or with an anti-competitive intent.
- Clarifying the Bureau's approach to joint dominance. Canada's abuse of dominance provisions can apply to the conduct of more than a single firm where those firms "jointly" dominate a market. The draft Abuse Guidelines explain that the Bureau may consider firms to be jointly dominant if they are engaged in similar potentially anti-competitive behaviour and appear to jointly hold market power based on their collective share of the market, barriers to entry or expansion, and other factors. In the Competition Bureau's view, there is no requirement that the jointly dominant firms co-ordinate their conduct in an explicit or tacit manner, only that they engage in similar potentially anti-competitive behaviour.
- Describing and explaining specific forms of anti-competitive conduct. The draft Abuse Guidelines provide the Competition Bureau's views as to how exclusive dealing, tying and bundling, and denial of access may constitute anti-competitive conduct.
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