The Competition Bureau's new guidance on and the amendments to the abuse of dominance provisions in the Competition Act significantly expand the scope of these provisions. These developments, coupled with private access to the Competition Tribunal, have the potential to significantly increase the use of the abuse of dominance provisions and enable private parties to resolve commercial disputes using the Competition Act.
There are three requirements that must be established to prove an abuse of dominance:
- One or more persons must substantially or completely control a class or species of business throughout Canada or any area thereof;
- That person or those persons must be engaging or have engaged (within the previous three years) in a practice of anti-competitive acts; and
- The practice must have had, be having or be likely to have the effect of preventing or lessening competition substantially in a market.
The Bureau's draft Bulletin primarily provides guidance on what constitutes an "anti-competitive act" for the purposes of the second requirement. Since June 2022, private parties are able to apply to the Competition Tribunal for leave to bring an application under the Competition Act's abuse of dominance provisions.
The Draft Bulletin on Amendments to the Abuse of Dominance Provisions
The Bureau's draft Bulletin is not a replacement for the Abuse of Dominance Guidelines (which the Bureau last updated in May 2019), but rather it is designed to be read alongside them as a supplemental resource.
Previously, the abuse of dominance provisions only applied to conduct that is intended to have a negative predatory, exclusionary or disciplinary effect on a competitor. The June 2022 amendments added a definition of "anti-competitive act" based on case law and expanded the scope of the abuse of dominance provisions to apply to conduct that is intended to harm competition. The Bureau's draft Bulletin identifies four types of conduct that may be intended to harm competition and how the Bureau may analyze them:
- Agreements between competitors. The draft Bulletin indicates that the Bureau will consider agreements between competitors to be reviewable under the abuse of dominance provisions where they have an anti-competitive purpose and have the effect or the likely effect of harming competition substantially, as they may limit the ability of, or incentive for, competitors to compete independently. There are other provisions of the Competition Act that apply to agreements between competitors - the criminal cartel provision (section 45) and the competitor collaboration provision (section 90.1). The Bureau will continue to refer agreements that give rise to a criminal offence for criminal prosecution, but for agreements that do not give rise to a criminal offence the Bureau may simultaneously investigate under both the abuse of dominance and competitor collaboration provisions and will take action under the appropriate provision (considering the available evidence and appropriate penalties).
- Information sharing. The draft Bulletin indicates that the Bureau sees information sharing as conduct that may facilitate conscious parallelism, which is a form of coordination that has long been outside of the scope of the Bureau's enforcement powers. According to the draft Bulletin, information sharing that increases the transparency of competitively sensitive information is concerning where it provides competitors with information that they would not otherwise have access to that contributes to recognizing or achieving coordinated outcomes, or monitoring compliance with them.
- Contracts that reference rivals. Contracts that contain terms that reference rivals, including MFN clauses, price parity clauses, non-discrimination clauses and meet or release clauses, may be pro-competitive or may be intended to harm competition. The draft Bulletin indicates that contracts that reference rivals may (i) reduce the incentive or ability to compete, (ii) facilitate coordination or (iii) exclude competitors.
- Serial acquisitions. While individual acquisitions are generally reviewed under the merger provisions of the Competition Act, serial acquisitions have an anti-competitive purpose and cumulatively have substantial competitive effects may be reviewed under the abuse of dominance provisions. The draft Bulletin also indicates that the Bureau may review single transactions coupled with anti-competitive conduct that collectively harms competition under the abuse of dominance provisions and that it may also simultaneously investigate a transaction under both the merger provisions and the abuse of dominance provisions where it appears that the transaction may be a part of a practice of anti-competitive acts.
Note that in all cases, the abuse of dominance provisions only apply to conduct where it is practiced by a dominant firm or group of firms (joint dominance). Whether a firm or a group of firms is dominant is a case-by-case assessment based on a variety of factors. While there is no market share presumption for dominance, the Bureau will generally proceed with further examination if a firm has a market share of >50% (or if a firm with market share of <50% has a substantial degree of market power) or if a group of firms alleged to be jointly dominance have a combined market share >65%.
The draft Bulletin also provides additional guidance on the Bureau's approach to assessing joint dominance and joint conduct. The draft Bulletin indicates that it is not necessary for there to be any agreement between jointly dominant firms relating to anti-competitive conduct and also that jointly dominant firms engaging in different, but complementary, practices may also contravene the abuse of dominance provisions. The Bureau also doesn't consider it necessary that all jointly dominant firms engage in anti-competitive conduct, although the Competition Tribunal has never considered a joint dominance case, so this interpretation is not conclusive.
Private Right of Access for Abuse of Dominance: Apotex Files First Private Abuse of Dominance Application
The June 2022 amendments to the Competition Act also extended private access to the Competition Tribunal to include actions pursuant to the abuse of dominance provisions. Previously only the Commissioner of Competition could bring abuse of dominance cases to the Tribunal. Now private parties can apply for leave to bring an action under the abuse of dominance provisions to the Tribunal, although the available penalties do not include damages. Any monetary penalties are in the form of administrative monetary penalties, which are paid to the government. The Tribunal may also make orders prohibiting the dominant firm from engaging in the practice of anti-competitive acts and/or requiring the dominant firm to take reasonable and necessary actions to overcome the effects of the practice of anti-competitive acts in the market.
The first private application for leave to bring an application under the abuse of dominance provisions was made by Apotex Inc., a pharmaceutical company, against Paladin Labs Inc., Endo Pharmaceuticals Inc., Takeda Canada Inc. and Takeda Pharmaceuticals U.S.A. Inc. (the "Respondents") on September 29, 2023. The Respondents are the only suppliers of a leukemia treatment drug, ponatinib, and Apotex wishes to launch a generic version of the drug to compete. The launch of a generic version of ponatinib would significantly drive down prices, but in order for Apotex to obtain regulatory approval for its generic drug, Apotex needs a small sample of ponatinib from the Respondents. Apotex's application explained that it was having difficulties obtaining the sample and alleged that the Respondents were abusing their monopoly by refusing to supply (and delaying supply of) ponatinib.
On October 13, 2023, Apotex filed a notice of discontinuance of the action. While neither Apotex or any of the Respondents made a public statement about the discontinuance, it is reasonable to assume that the parties settled and the Respondents provided the sample of ponatinib to Apotex. Accordingly, while the case did not result in any decision from the Tribunal, it appears to have swiftly resolved the commercial dispute between the parties. This test case could open the door for more private parties to us the abuse of dominance provisions and private access to the Tribunal as a tool to solve their commercial disputes.
While the Bureau has requested public comment on the draft Bulletin, typically when it does so the final guidelines are not materially different from the draft.
The Bureau's interpretation of the expanded scope of the abuse of dominance provisions could lead to more abuse of dominance investigations and coupled with private access to the Competition Tribunal, could lead to more private actions by companies looking to solve commercial disputes using the Competition Act.
We will be watching closely to see whether any further changes are made in response to comments received by the Bureau before the new Bulletin is finalized and on whether any further private actions are brought under the abuse of dominance provisions.
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.