On January 16, 2009, Canada's Competition Bureau (the
Bureau) released draft revised Abuse of Dominance
Guidelines1 (the Updated Guidelines), which are
intended eventually to replace the original guidelines released in
Abuse of dominance occurs when a dominant firm (or group of
firms) in a market engage in a practice of anti-competitive acts
with the result that competition is prevented or lessened
substantially in a market. Sections 78 and 79 of the
Competition Act2 set out the powers of the
Competition Bureau to prohibit a dominant firm (or group of firms)
from engaging in anti-competitive practices, or to require other
remedial action if necessary to restore competition. At present, no
damages or fines for abuse of dominance are provided for under the
Act, although amendments to introduce fines have been
proposed by the Government. To prove abuse of dominance, three
principal elements must be established:
1. one or more persons substantially or completely controls,
throughout Canada, a class or species of business;
2. the person or persons have engaged in a practice of
anti-competitive acts; and
3. the practice has had, is having, or is likely to have the effect
of preventing or lessening competition substantially.
The Updated Guidelines do not represent a fundamental shift in
the Bureau's enforcement policy, but rather expand upon the
original guidelines and revise them in light of recent
jurisprudence and developments in economic thinking. Most notable
among these is the decision of the Federal Court of Appeal in the
Canada Pipe3 case, which provided the first
opportunity for the Federal Court to consider the application of
the abuse of dominance provisions in sections 78 and 79 of the
Act. Other relevant events include the publication of two
separate bulletins clarifying the Bureau's approach to the
abuse of dominance provisions in the context of the retail grocery
and telecommunications industries, respectively.4
Notable changes from the original guidelines include:
An updated explanation of how the Bureau will assess market
power, including the application of the "hypothetical
monopolist" test in defining the relevant market.
An updated approach to joint dominance. According to the
Updated Guidelines, the Bureau will consider joint dominance where
the firms appear to collectively hold market power based on their
combined share of the market, and are engaged in similar alleged
anti-competitive practices. In determining issues of joint
dominance, the Bureau will also address, among other factors,
barriers to entry or expansion in the affected market. The Updated
Guidelines do not seem to require any co-ordinated conduct between
the firms and emphasize that the mere exercise of market power on a
collective basis does not in and of itself raise any issue under
the abuse of dominance provisions.
An outline of the Bureau's approach to anti-competitive
intent and legitimate business justifications in light of the
FCA's decision in the Canada Pipe case. The Updated
Guidelines indicate that the Bureau may consider valid business
justifications for conduct that is allegedly anti-competitive,
where it can be demonstrated that the anti-competitive effects were
not the predominant purpose of the conduct. However, the Bureau
will also consider the necessity of the conduct and whether there
is an equally effective manner in which the cost savings could be
achieved other than through the conduct in question.
Expanded discussion of specific forms of anti-competitive
conduct, including: exclusive dealing; tying, bundling and bundled
rebates; and denial of access to a facility or service.
Acknowledgement by the Bureau that it may consider a regulated
conduct defence in its assessment.
The Updated Guidelines remain in draft form and are open to public
comment until April 20, 2009.
The HR Guidelines focus attention on an area that is not typically regarded as an antitrust "hot spot" but has been the subject of several high-profile proceedings in recent years in the United States.
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