The Competition Bureau (Bureau), Canada's antitrust law enforcement agency, had a very busy March 2019. In addition to seeing the appointment of Matthew Boswell as Commissioner of Competition (Commissioner), the Bureau issued updated guidelines concerning its enforcement approach to abuse of dominance and intellectual property, as well as slightly revised Immunity and Leniency Programs.
- Matthew Boswell appointed Commissioner of Competition for a five-year term.
- Competition Bureau issues new and substantially revised Abuse of Dominance Enforcement Guidelines, which notably omit the longstanding 35 percent market share safe harbour threshold.
- Minor changes to the Bureau's Intellectual Property Enforcement Guidelines, and Immunity and Leniency Programs.
The Government of Canada announced the appointment of Matthew Boswell as Commissioner on March 5, 2019.1 Appointed for a five-year term, Mr. Boswell had been serving as Interim Commissioner since May 2018, when his predecessor, John Pecman, retired following a long career at the Bureau. Since joining the Bureau in 2011, Mr. Boswell served in senior management positions in its Criminal Matters Branch (similar to Mr. Pecman). Immediately prior to his appointment as Interim Commissioner, Mr. Boswell had served as Senior Deputy Commissioner, Mergers and Monopolistic Practices Branch.
Updated Abuse of Dominance Enforcement Guidelines
The Bureau issued new Abuse of Dominance Enforcement Guidelines on March 7, 2019 (Abuse Guidelines). The new Abuse Guidelines provide new insight to the Bureau's approach to enforcement in this area.
In Canada, abuse of dominance, similar in concept to section 2 "monopolization" in the United States2 and Article 102 "abuse of dominant position" in the European Union,3 concerns anticompetitive conduct by a dominant firm that can be challenged by the Bureau in the Competition Tribunal (Tribunal) on the basis of anti-competitive effects. The three requisite elements of abuse of dominance are: 1. A "dominant" firm or firms ("one or more persons [who] substantially or completely control, throughout Canada or any area thereof, a class or species of business"); 2. The dominant firm or firms are engaging in a "practice of anti-competitive acts"; and 3. The practice of anti-competitive acts results in a substantial lessening or prevention of competition in a market.4
Abuse of dominance in Canada can only be challenged by the Bureau in the Tribunal, and the remedies are generally limited to prohibition orders (requiring the dominant firm or firms to cease the relevant anticompetitive conduct), and administrative monetary penalties (AMPs) of up to CA$10 million for a first instance or CA$15 million for subsequent instances. An important distinction between Canada and other jurisdictions' treatment of abuse of dominance/monopolization is that, in Canada, no damages are available and there is no private right of access.
Among the changes to the Abuse Guidelines from the immediate past iteration in 2012, we consider the following the most significant and of general interest:
- The Bureau now considers dominance - which the Competition Act (Act) defines as a circumstance where one or more persons "substantially or completely control, throughout Canada or any area thereof, a class or species of business" - to mean that the relevant firm holds "a substantial degree of market power". Earlier versions of the Abuse Guidelines suggested market power alone was sufficient.
- Notwithstanding, the Bureau has given itself more liberty to pursue potentially powerful market participants whose market share might fall below levels traditionally assumed to reflect unilateral market power. Specifically, the Bureau abandoned the 35 percent market share safe harbour threshold, below which the Bureau previously stated it would not generally further investigate a single firm. This is consistent with recent enforcement activity, including the Bureau's (now closed) grocery industry investigation, where the market share of the firm under scrutiny was below 35 percent, and where the Bureau noted that "market share may be a less informative indicator of market power, and accordingly, should be afforded less weight, in cases involving upstream buying markets in the grocery sector."5 The new Abuse Guidelines specify that a market share above 50 percent will generally prompt further investigation, but a market share below 50 percent will only prompt further investigation if it appears the firm possesses a "substantial degree of market power" and can exercise that substantial degree of market power within a "reasonable time while the conduct is ongoing".6
- The new Abuse Guidelines specify that the Bureau will encourage voluntary compliance and negotiations to achieve a Consent Agreement registered with the Tribunal (such Consent Agreements have the effect of a court order). In appropriate circumstances, the Abuse Guidelines state that a Consent Order may include both prohibition on the impugned conduct, as well as requirements that the firm take "positive steps" to restore competition.
- The encouragement of voluntary compliance is also consistent with the Bureau's position in the new Abuse Guidelines that it will not necessarily seek AMPs as a matter of course, but will base decisions on whether to seek AMPs on factors such as a firm's willingness to cooperate with the Bureau in a timely manner, history of compliance, and state of mind regarding compliance (i.e., intention to not comply vs. wanton or reckless disregard). The new Abuse Guidelines also specify that the quantum of AMPs sought will be based on the competitive effects of the conduct, revenues generated, profits (real or anticipated), financial position of the firm, compliance history, and any other relevant factor.
Updated Intellectual Property Enforcement Guidelines
On March 13, 2019, the Bureau released an updated Intellectual Property Enforcement Guidelines (IPEGs), with minor revisions from the last version.
The Bureau has long maintained that antitrust law and intellectual property law (copyright, trademark, patents, and other regimes that bestow rights over intangibles) are not adverse, but "complimentary instruments of government policy that promote an efficient economy."7 The Act itself mentions intellectual property twice explicitly – in one section,8 by providing a special remedy for anti-competitive effects that result from the exercise of patent, trademark, copyright, or integrated circuit topography rights on application by the Attorney General of Canada; and in another section, by specifying that conduct engaged in, pursuant only to the exercise of intellectual property rights (under the relevant intellectual property legislation), is not an anti-competitive act under the abuse of dominance provisions.9
The Bureau's longstanding approach to intellectual property involves a dichotomy of two kinds of conduct: first, conduct that involves the "mere exercise of the IP right", and second, conduct involving "something more than the mere exercise of the IP right". Regarding conduct involving the "mere exercise" of IP rights, the Bureau will only seek a special remedy for such "mere exercise" conduct where the relevant IP statute is not effective. The Bureau's principal concern is with the "something more" category of conduct, where the Bureau will investigate the conduct under the Act's ordinary civil provisions (for example, refusal to deal, price maintenance, exclusive dealing, tied selling, market restriction and abuse of dominance), and criminal provisions (for example, cartel conspiracy, foreign directives and bid rigging). Intellectual property in this way is treated in the same way as ordinary property, and the Bureau states that it, "does not presume that the conduct violates the general provisions of the Act or needs to be remedied under section 32 [the special remedy]."10
The last significant update to the IPEGs was issued in 2016. In that prior version, the Bureau specified its approach to, amongst other things, settlements of patent litigation between generic and innovator drug companies, patent assertion entities (sometimes referred to as "patent trolls"), and standard essential patents. Regarding its approach to settlements between generic and innovator drug companies, the Bureau takes the position that 1. Settlements that involve a generic entering the market prior to patent expiry do not generally pose an issue; 2. Settlements that involve a payment to the generic and generic entry on or prior to expiry of the patent may be reviewable conduct under the civil provisions of the Act; while 3. Criminal enforcement may ensure if the settlement delays generic entry past patent expiry, involves products other than those at issue in the litigation, or is otherwise a "sham". The IPEGs specifically state the Bureau recognizes that Canada has a unique regulatory environment for patented drugs under the Patented Medicines (Notice of Compliance) Regulations (PMNOC Regulations) that incentivizes settlements, including exclusivity afforded to the first generic firm to challenge a patent and the potential for a patent holder to be liable to a generic firm for damages. The relevant regulations also used to permit two potential tracks of litigation – one where the generic challenges the patent; and another where (assuming the patent holder is successful in the first instance) the patent holder seeks damages against the generic for infringement. Reflecting the elimination of the possibility of the dual track as a result of amendment to the PMNOC Regulations, the revised IPEGs omit reference to dual track risk for litigation commenced after September 21, 2017.
Update to Immunity and Leniency Programs
On March 15, 2019, the Bureau released a slightly updated version of its Immunity and Leniency Programs,11 used by the Bureau to detect and investigate cartel conspiracy conduct. In this new technical guidance document, the Bureau specifies that notwithstanding it does not generally identify them publicly, cooperating witnesses under the programs are not considered "confidential informers" and do not benefit from informer privilege.12
The Immunity and Leniency Programs are longstanding and generally modelled after the Leniency Program administered by the US Department of Justice.13 Pursuant to the Bureau's programs, a party may qualify for "Immunity" from prosecution if (a) the Bureau is unaware of the offence and the party is the first to disclose the elements of the offence, or (b) the Bureau is aware of the offence and the party is the first to come forward prior to a referral of the matter for prosecution. Subsequent applicants can apply for "Leniency" (lenient treatment in sentencing recommendation), which requires cooperation and a guilty plea.
The recent minor update follows more significant changes to the Immunity and Leniency Programs in September 2018. The 2018 amendments ended the automatic provision of immunity to a corporate immunity applicant's officers, directors and employees, replaced by a requirement that any implicated individuals provide cooperation to qualify. Furthermore, the amendments provided that no automatic fine reduction will be issued based on when a leniency applicant first contacts the Bureau. Instead, fine reductions are now based on the value placed on the cooperation. As well, the 2018 amendments suggested that witness interviews might be recorded or taken under oath.
In sum, although undertaken to ensure a higher chance of success by the Director of Public Prosecutions in any subsequent prosecution of non-cooperating parties, the 2018 amendments have resulted in the Immunity and Leniency Programs varying from practice in other jurisdictions, including the US. As a result, the Canadian programs might be considered less attractive to potential applicants, especially for conduct outside of Canada.
1. Government of Canada, Innovation, Science and Economic Development Canada, News Release: Government of Canada appoints Matthew Boswell Commissioner of Competition (March 5, 2019), online.
2. Sherman Act, 15 U.S.C. §2: "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court."
3. Consolidated version of the Treaty on the Functioning of the European Union, O.J. 115, 09/05/2008 P. 0089 – 0089, Art. 102: "Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States."
4. Competition Act, R.S.C. 1985, c. C-34, s. 79.
5. Competition Bureau (Canada), Competition Bureau statement regarding its inquiry into alleged anti-competitive conduct by Loblaw Companies Limited (November 21, 2017), online.
6. Competition Bureau (Canada), Abuse of Dominance Enforcement Guidelines (March 7, 2019), online.
7. Competition Bureau (Canada), Intellectual Property Enforcement Guidelines (March 13, 2019), para. 3, online.
8. Competition Act, R.S.C. 1985, c. C-34, s. 32.
9. Competition Act, R.S.C. 1985, c. C-34, s. 79(5).
10. Competition Bureau (Canada), Intellectual Property Enforcement Guidelines (March 13, 2019), para. 6, online.
11. Competition Bureau (Canada), Immunity and Leniency Programs under the Competition Act (March 15, 2019), online.
12. Competition Bureau (Canada), News Release: Update to Immunity and Leniency Programs clarifies status of cooperating witnesses (March 15, 2019), online.
13. United States Department of Justice, Antitrust Division, Leniency Program, online.
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