Canada: Competition/Antitrust Law

Last Updated: March 1 2019
Article by Sandy Walker

More enforcement in the digital economy

Last year began with two linked and dramatic headlines from The Economist newspaper: "How to tame the tech titans – Competition in the Digital Age," (January 20, 2018), followed by an article titled, "Coping with techlash". We expect similar headlines and concerns in 2019, but anticipate the concerns to go beyond the "tech titans", as competition lawyers and policy makers try to come to grips with the impact of the digitalization of the economy on antitrust/competition analytical frameworks. There is a sense that regulators do not sufficiently understand the digital transformation, including the proliferation of online platforms and networks, the use of pricing algorithms, Big Data and the ecosystem surrounding the leading technology companies. This has become significant enough that the US Federal Trade Commission launched a series of hearings in the latter half of 2018 and into 2019, on the topic of "Competition and Consumer Protection in the 21st Century".

Canada's Competition Bureau (Bureau) has also completed a number of studies relating to the digital economy, leading to two reports, Big Data and Innovation and Technology-Led Innovation in the Canadian Financial Services Sector. While taking the position that its current enforcement tools are adequate to meeting the challenges of the digital economy, one of the Bureau's signature priorities outlined in its Annual Plan is, "fighting new forms of anti-competitive conduct to reinforce consumer confidence in the digital economy".  

As a reflection of this focus, as of May 2018, the Bureau had 49 ongoing digital economy cases. The Bureau's enforcement efforts have included cases relating to deceptive marketing practices in the online retail segment, and the Bureau has stated it will challenge misrepresentations made by companies in relation to the collection and use of data, the enforcement of which may overlap with that under privacy law. The Bureau also plans to enhance its capacity to understand and take action involving new technologies that may hinder competition and innovation, such as pricing algorithms and blockchain technologies. To that end, the Bureau will be filling the newly-created position of Chief Digital Enforcement Officer in the coming months.

As we reported in, "From hipster antitrust to Big Data: fresh challenges to competition law?", the digital economy has led to some political and opinion leaders in the US and elsewhere – the so-called "hipster antitrust" movement – to question the ability of traditional competition law to address broader concerns such as employment and market power itself. In the context of merger review by competition authorities, when a dominant firm acquires a small firm in an adjacent, but not directly, competing market, traditional antitrust analysis may not identify any concerns because of the focus on adverse price impacts. However, "hipsters" ask whether such an acquirer will have further entrenched its market power in a way that undermines competition in the long run. These, and related concerns, will be on the minds of competition policymakers and enforcers in 2019, but it remains to be seen whether they will translate into concrete policy changes and enforcement decisions at this juncture.

Abuse of dominance

In 2018, we also witnessed the final chapter of the Commissioner of Competition's successful challenge of restrictions on the display and use of certain property-related data imposed by the Toronto Real Estate Board (TREB) on its members providing Virtual Office Website services to their clients. In August, the Supreme Court of Canada denied a leave to appeal from the Federal Court of Appeal's upholding of the Competition Tribunal decision against TREB. The decision provides a number of lessons for dominant firms and associations operating in Canada that could be significant factors in future Bureau enforcement efforts.

First, the case applied the abuse of dominance provision to a trade association's rules. At first instance, the Competition Tribunal ruled in favour of TREB on the basis that the board did not compete with the member real estate brokers against whom the restrictions applied. This decision was overturned, and trade associations and similar organizations can now expect that if they are dominant, their by-laws and rules could be subject to scrutiny as an abuse of dominance.

Second, the TREB decision highlights the application of the abuse provision to the digital economy, underscoring that the refusal to provide access to data that prevents the emergence of new products and types of competition can be regarded as anti-competitive, and fines of up to CA$10 million might apply. If a data owner is dominant within a particular product market, it may be required to provide rival firms with access to that data if it is a critical input. Moreover, the TREB case could have wider repercussions beyond data in the digital economy. For example, access to networks and platforms may be seen as essential to competing in certain markets. Third, the Federal Court of Appeal decision recognized that compliance with privacy law could be a legitimate defence to a restriction on the use of data.

Cartel enforcement

The Competition Bureau will continue to pursue conspiracies that fix prices or allocate markets in the coming year. In particular, we will be watching the Bureau's investigation into the late-2017 merger between Postmedia and Torstar, which included the swap of 41 newspaper publications and the subsequent closure of 36 of them. While the Bureau did not challenge the merger itself, it is pursuing an investigation to determine if the merging parties behaved in a manner contrary to the Competition Act.

The repercussions of revisions to Canada's Immunity and Leniency programs in 2018 may well reduce their attractiveness to immunity and leniency applicants in 2019. Among other changes, immunity is now provided later in the process, with cooperation expected under a "Grant of Interim Immunity". Immunity for directors, officers and employees is no longer automatic, and instead will be considered based on an individual's cooperation. Leniency discounts are now contingent on the value of cooperation provided, not necessarily when markers were placed.

Competition class actions

We will be following the Toshiba Corporation, et al v. Neil Godfrey case, which goes to the Supreme Court of Canada. Among other things, the court will consider whether "umbrella purchasers", i.e., those who purchase from sellers who are not part of a conspiracy, have a cause of action in Canada. The argument is that non-cartelist sellers are able to charge higher prices as a result of the conspiracy, and therefore, umbrella purchasers have also suffered damages.

New Commissioner of Competition

Finally, the direction and enforcement activity undertaken by the Competition Bureau could change significantly, depending on who is chosen as the new Commissioner of Competition. The Bureau is expected to appoint the Commissioner within the first half of 2019.

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com

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. Specific Questions relating to this article should be addressed directly to the author.

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