In an unprecedented move, the Federal Government has included as
part of its 2009 Budget Implementation Act (Bill C-10) a radical
overhaul of the Competition Act and a number of important
amendments to the Investment Canada Act. Budget bills are enacted
quickly and with few revisions. A new era in Canadian competition
law is on the horizon.
This McMillan Bulletin discusses the proposed amendments
relating to Pricing Practices and their implications for business.
The proposed amendments relating to, Advertising and Marketing,
Competitor Agreements and Mergers are dealt with in separate
The New Pricing Practices Regime
Bill C-10 introduces nothing short of a complete overhaul of the
Competition Act provisions relating to pricing:
Price Discrimination, Promotional Allowances and Predatory
Pricing Offences Repealed — The antiquated provisions (in
Sections 50 and 51 of the Competition Act) did not deserve to be
criminal offences. Under the new regime, these activities can be
subject to review and enforcement action only under the abuse of
dominance provisions of the Act – i.e. the conduct will
have to be engaged in by a person that substantially or completely
controls a market, result in a substantial prevention or lessening
of competition, and meet the other requirements of the abuse
provision; a high threshold indeed.
Price Maintenance Decriminalized — Bill C-10 repeals
the criminal offence of price maintenance (Section 61 of the Act)
and introduces a new, non-criminal reviewable practice of price
maintenance under which the Competition Tribunal can review and
prohibit the practice.
While the substantive test for price maintenance under the new
civil regime is very similar to the existing criminal definition,
the person actually must have engaged in the conduct whereas under
the current criminal law, attempts to influence also are
actionable. More importantly, price maintenance will only be
subject of an order of the Competition Tribunal if it has had, is
having or is likely to have an "adverse effect on
competition" in a market. The new civil regime carries forward
the existing defence relating to suggested resale prices. The
Commissioner of Competition and private parties both may initiate
Competition Tribunal proceedings in respect of price maintenance
(although a private party first must obtain leave of the Tribunal).
If the Tribunal determines that the respondent has engaged in price
maintenance, it may order the respondent to stop engaging in the
practice or accept the other person as a customer on usual trade
terms. However, it has no authority to fine or make other monetary
Although the Competition Bureau only rarely challenges
distribution practices as an abuse of dominant position, the
amendments will supplement the current prohibition/remedial order
provisions with large "administrative monetary
penalties". The maximum fine will be C$10 million for the
first occurrence and C$15 million for subsequent occurrences. Since
the Bureau tends to define relevant markets narrowly, firms are
likely to become more cautious about engaging in aggressive pricing
or distribution practices that could lead to competitor complaints
of predatory or exclusionary activity (The Bureau is currently
consulting on proposed updates to its Abuse of Dominance
Enforcement Guidelines which discuss these issues in greater
detail). The amendments do not introduce direct private rights of
action for parties affected by an abuse of dominance. However, the
introduction of penalties will likely encourage plaintiffs to seek
to reverse case law which has held that abuse of dominance was not
an "unlawful act" necessary to ground torts such as
interference with economic relations and conspiracy to injure.
Implications for Business
The amendments will give suppliers much more flexibility in
their pricing decisions. The limits on manufacturers, wholesaler
and retailer actions will be minimal, the outright prohibitions
against mandated minimum resale prices and the burdens of complying
with rigid price discrimination / promotional allowance rules will
be removed. Only firms whose pricing might have negative effects on
competition need now be concerned with those limitations.
The new rules also permit more flexibility in crafting pricing
programs on a North American (or wider) basis. For example, Bill
C-10 will permit unilateral minimum advertised pricing policies
(MAPPs), which are commonly used in the United States and are
problematic under the current Canadian price maintenance rules.
However, as noted above there are large fines for firms who are
found to have violated the abuse of dominance provision. Firms
having a material share of a market will need to consider the
potential impacts on competition of their pricing policies.
The foregoing provides only an overview. Readers are
cautioned against making any decisions based on this material
alone. Rather, a qualified lawyer should be consulted.
The Commissioner of Competition addressed innovation, enforcement and policy initiatives at the Competition Bureau in his keynote speech, "Strengthening Competition: Innovation, Collaboration and Transparency."
Used car listing website operator CarGurus Inc.'s attempt to force rival Trader Corporation to supply it with vehicle listing data has encountered a dead end as the Competition Tribunal denied it leave to commence a private application under several provisions of the Competition Act.
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