Contributors: Michael Osborne, Sonny Ingram, Sandra Monardo, Michelle Booth, Adam Wygodny, and Donna Wilson.
Canada’s new competition law
Budget 2009 includes the most significant amendments to the Competition Act in a generation:
· A new “per se” conspiracy offence makes it illegal for competitors or potential competitors to fix prices, allocate markets, or control production of a product, even if there is no effect on competition. Agreements that are ancillary to a broader agreement and are reasonably necessary to that agreement are exempt.
· Sentences for conspiracy and bid rigging rise from five years to 14, and the fine for conspiracy, from $10m to $25m.
· The Competition Tribunal can prohibit other agreements that are likely to lessen or prevent competition substantially.
· Price maintenance has been decriminalized, but can be prohibited if competition is adversely affected.
· Dominant firms that engage in anti-competitive conduct can now be fined up to $10m for the first offence.
· Predatory pricing and price discrimination have been decriminalized but they can be considered “anti-competitive acts” and attract fines of up to $10m.
· Fines for deceptive marketing practices (false advertising) will be raised from $100,000 to $750,000 for a first offence.
· The time limit on merger review has been reduced to one year after substantial completion, down from three years.
· The thresholds for a merger being pre-notifiable have been increased and indexed.
· Merging parties must now wait 30 days after pre-notification to close, but the Bureau can freeze the merger for another 30 days by making a second request for information.
The budget also amended the Investment Canada Act
. The threshold for a transaction becoming reviewable will be raised incrementally to $1b, then indexed. The government can now block investments on national security grounds.
Labatt’s stout defence
On January 16, 2009, the Competition Bureau announced that it would not challenge Labatt
’s acquisition of discount brewer Lakeport
, ending a hard-fought saga.
On February 1, 2007, Labatt announced the merger. The Tribunal denied the Bureau’s application to block the merger temporarily because there was no evidence that allowing Labatt to complete the transaction would impair the Tribunal’s ability to remedy its effect on competition. In January 2008, the Federal Court of Appeal dismissed the Bureau’s appeal, rejecting the Bureau’s argument that injunctions to stop mergers should be virtually automatic.
Meanwhile, in November 2007 the Bureau had obtained a second set of orders under s. 11 requiring Labatt and Lakeport to produce documents and information. In January 2008, the Federal Court quashed those orders because the Bureau had made misleading, inaccurate and incomplete disclosure. The Bureau had not disclosed that in seeking earlier s. 11 orders, it had told the court that those earlier orders would provide enough information to complete the investigation.
In an unrelated case, the Supreme Court held that a judge does not have the power to order compensation when making a production order under the Criminal Code
Where the cost of compliance is unreasonable, the respondent should apply for a full or partial exemption. Telus
’ annual costs of responding from such orders was equivalent to a person making $100,000 and spending $58 to comply with jury duty.
Gas price fixing
The Bureau charged 13 individuals and 11 companies with fixing the retail price of gasoline in Quebec. Four companies, including Ultramar
, and six individuals have pleaded guilty and been fined over $2.6m. Four individuals have been sentenced to imprisonment for terms totalling 44 months.
New Brunswick chicken processor Nadeau buys all the chickens produced by Westco, and two related companies, which constitute 75% of Nadeau’s supplies. Westco wants to vertically integrate from “farm to fork”. When Nadeau refused to sell out, Westco gave Nadeau 6 months notice that they would no longer supply chickens.
The Tribunal granted Nadeau leave to apply under the Competition Act’s
refusal to deal provisions,
and an interim supply order.
There was a serious issue to be tried by virtue of Nadeau’s obtaining leave to bring an application. There was irreparable harm because the Tribunal could not award damages for a refusal to deal. The balance of convenience favoured Nadeau as the loss of Westco’s chickens represent a significant loss of profits. Thus, the first two elements of the injunction test will be met in virtually any case where a party has been granted leave to bring a private application.
The Tribunal heard the application in the fall of 2008.
More recently, Westco decreased the number of chickens supplied to Nadeau. Nadeau has brought a contempt motion, which has yet to be heard.
Chemicals International BV pleaded guilty to fixing the price of hydrogen peroxide in Canada and was fined $3.15m.
This was Akzo’s third conviction.
Three construction companies and their presidents are accused of rigging bids for work at Chicoutimi Hospital and an Alcan smelter.
The Bureau obtained orders prohibiting GDG Environnement
from making arrangements with competitors to protect market shares for bio-insecticides and insect control services.
American Iron & Metal Company Inc
. agreed to hold S N F Inc.
separate for 60 days after buying the company in exchange for the Commissioner’s agreement not to prevent the closing of the transaction.
bought Reuters PLC
after agreeing to divest copies of three Reuters databases to resolve the Bureau’s concerns about the lack of remaining competition in the market for financial data on companies and transactions. 
Superior Plus L.P.
resolved concerns over its acquisition of assets of Irving Oil
by agreeing to divest Irving’s bulk propane storage tanks in Corner Brook and Grand Falls-Windsor. The Bureau was concerned about the remaining competition in Newfoundland retail propane markets but acknowledged that efficiency gains would likely arise from the transaction.
will not have to sell an Etobicoke paint factory formerly owned by Imperial Chemical Industries
after all, because General Paint Corp.
(purchaser of all the other divested assets) already has a manufacturing plant. 
and Yahoo! Inc.
terminated their advertising agreement in Canada after US and Canadian competition authorities cooperated in blocking their agreement in the US by threatening an antitrust suit.
A proposed class action by purchasers of electronic goods containing DRAM memory chips would degenerate into a series of individual trials, a BC court held in refusing to certify the proceeding.
Key issues, including whether the plaintiffs paid more because of price-fixing by manufacturers, could not be determined on a class-wide basis. This decision has been appealed.
An Ontario court refused to certify a class action brought by two Quizno
’s franchisees against Quizno’s and Gordon Food Service, a food distributor.
The claim alleged price maintenance and a conspiracy between Quizno’s and GFS to overcharge franchisees. The franchisees could not prove loss on a class wide basis.
A BC court refused to certify a proposed class action alleging Toyota
’s Access Program constituted price maintenance because the plaintiffs could not show that proof of loss on a class-wide basis was possible.
Also, the Supreme Court of Canada denied leave to a Quebec plaintiff who sought to institute a similar class action against Toyota and 38 dealers in Montreal.
In 2003, Toyota donated $2.3m in a settlement with the Bureau.
and Swiss International Air Lines settled a class action alleging they conspired with other airlines to fix prices for air cargo. They agreed to pay US$5.3m and to cooperate in the prosecution of the other defendants.
The Divisional Court denied leave to appeal a decision partially certifying a class action alleging that the “economic effect” of DuPont
’s pricing is price maintenance.
Both parties wanted to appeal: DuPont, to overturn certification; Axiom
, to expand the scope of certification.
The court-approved settlement providing Servier
, an ADIR
affiliate, with the patent for the heart drug perindopril does not offend the conspiracy provisions of the Competition Act
because the settlement was authorized by the Patent Act,
said the Federal Court in dismissing Apotex
A Quebec court refused to hear a motion to authorize a class action alleging Mitsubishi
participated in a conspiracy to charge higher prices for vehicles in Canada than in the US
The claim was too vague and did not allege any connection with Quebec.
The BC Court of Appeal held that a plea by Sun-Rype
that suppliers of high fructose corn syrup conspired to fix prices is a plea of “fraud” for purposes of the Limitation Act
Canada’s major suppliers of fine papers, including Domtar and Cascades, agreed to pay $2.95m to settle class actions alleging that they fixed prices for carbonless paper sheets in Ontario and Quebec.
Using an affiliate to submit a bid to block other bidders offends the standards of conduct expected of bidders, even though it does not breach the Competition Act
, a Quebec court held. Pest control company GDG Environment
won a bid by submitting a second, very expensive, bid through its affiliate Sylvico
that made GDG’s bid score higher than its rival Groupe Bio-Services
’s transfer of ownership and relocation polices are not anticompetitive, according to the Bureau. These polices further legitimate interests like preserving team rivalries, attracting a broader audience, and encouraging investment. The inquiry was launched after the NHL blocked Research in Motion
founder Jim Balsillie from buying and moving the Nashville Predators. The NHL had a legitimate interest in keeping the Predators in Nashville, the Bureau said.
Insurance Corporation of British Columbia’s
policy of not allowing brokers affiliated with its competitors to sell those competitors’ optional auto insurance is not abuse of dominance even though it restrains competition, the Bureau found. Most brokers are non-affiliated; private insurers can compete with ICBC through them.
The Bureau launched a study to examine the economic impact of the regulating practices used in dentistry.
Canadian Standard Travel Agent Registry
, was denied leave to bring a private application to force the International Air Transport Association
to permit travel agents to continue to issue paper rather than electronic tickets.
A disgruntled sports fan lost a face-off with the Ottawa Senators when the Tribunal found there was no evidence that multi-game ticket packages had any impact on his business or that the packages constituted tied selling.
The Tribunal slammed the door on an inmate who wanted to challenge prison rules requiring inmates to buy merchandise exclusively from Home Hardware.
Go Travel Direct.Com Inc.
engaged in false advertising by running an ad comparing its prices with those of Maritime Travel Inc.
when it had lowered its price before running the ad and raised it immediately after.
Imperial Brush Co. Ltd.
and an affiliatedid not perform proper and adequate tests before advertising that the Supersweep Chimney Cleaning Log and other products eliminate chimney deposits.
Imperial challenged the Competition Act’s
deceptive marketing provisions, saying they restrict freedom of speech, but lost. Imperial was ordered to pay a $25,000 amp, $40,000 in costs, and to publish a correction.
A Mississauga man violated conditions of his release relating to his guilty plea to fraud in connection with an advanced fee lottery and cheque clearing scam and was sentenced to more jail time, bringing his sentence to 20 months in total.
A DataCom Marketing Inc.
senior manager pleaded guilty to defrauding businesses of an estimated $150 million over 10 years through a business directory scam. He received a two-year conditional sentence.
Northern Response International Ltd.
agreed to pay $400,000 in penalties and costs, offer a full refund, and broadcast corrections because of unproven weight-loss claims about its Velform Sauna Belt.
The Bureau’s revised draft Abuse of Dominance Guidelines
updated the Bureau’s thinking on exclusive dealing, tying and bundling, denial of access to an essential facility or service, and predatory conduct.
Both the US
and the EU
issued new guidance on abuse of dominance/monopolization in 2008.
During 2008, the Bureau issued numerous guidelines and information bulletins in both draft and final form. The Bureau outlined its approach to searches and seizures in its Information Bulletin on Sections 15 and 16 of the Competition Act
A draft bulletin on Multi-Level Marketing and Schemes of Pyramid Selling
distinguished lawful multi-level marketing from unlawful pyramid selling.
The Bureau updated the Corporate Compliance Programs Bulletin
The draft Bulletin on Trade Associations
notes that because trade associations bring together competitors, they create a risk of anti-competitive behaviour.
The Bulletin on Efficiencies in Merger Review
says that the Bureau will now evaluate claims that efficiencies offset anti-competitive effects of a merger.
The Long Arm of US Antitrust
Price squeezing in the absence of a duty to deal is not monopolization, the US Supreme Court ruled. Price squeezing involves a firm charging a rival too high a wholesale price, while charging a retail price that is too low for the rival to make a profit. Except in rare cases, firms have no obligation to deal with rivals. Thus they have no obligation to give them an attractive price. So long as retail prices are not so low as to be predatory, they are lawful. A firm has no obligation to preserve its rivals’ profit margins.
A federal appeal court held that Rambus Inc.
did not commit monopolization when it did not disclose its patents for faster DRAM memory chips to a standards setting organization (SSO) that ultimately incorporated technologies covered by the patents into standards. The FTC found that had Rambus disclosed the patents, the SSO either would not have used its technologies, or it would have insisted on favourable licensing terms. However, there was insufficient evidence to conclude that the SSO would not have used the technologies. That left the theory that the SSO would have obtained favourable licensing terms. But Rambus’ ability to obtain higher royalties flowed naturally from the patents themselves, which is not unlawful.
Across the Pond
In February Microsoft
was fined €899m for unreasonable royalty rates associated with information licenses that Microsoft was ordered to disclose after being convicted of abuse of dominance in 2004.
In late 2007, the European Commission initiated abuse of dominance proceedings against Microsoft for once again refusing to disclose interoperability information related to Office suite and other products, and for tying a range of products to the sale of Windows.
In January 2009, the Commission held that the tying of Internet Explorer to Windows is an abuse of dominance.
The Commission is alleging that Intel
has abused its dominant position in the central processing unit market by attempting to exclude its main rival, AMD
by providing rebates to retailers in exchange for exclusivity arrangements.
Contributors: Michael Osborne, Sonny Ingram, Sandra Monardo, Michelle Booth, Adam Wygodny, and Donna Wilson.
Affleck Greene McMurtry LLP practises competition law and all types of commercial litigation. We act for clients in criminal and civil proceedings and investigations, merger reviews, and provide advice about business practices.
 The Commissioner of Competition v. Labatt Brewing Co. Ltd, 2007 Comp. Trib. 9, affirmed, 2008 FCA 22.  Canada (Commissioner of Competition) v. Labatt Brewing Co., 2008 FC 59.  Section 487.015. Tele-Mobile Co. v. Ontario,  S.C.J. No. 12  Competition Bureau Uncovers Gasoline Cartel in Quebec Price-fixing Charges and Guilty Pleas Announced in Four Local Markets, June 12, 2008, http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02694.html; Third Individual Pleads Guilty in Quebec Gasoline Cartel Case, October 31, 2008, http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02744.html, More guilty pleas in Quebec Gasoline Cartel Case, March 17, 2009, http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03024.html, Sixth individual pleads guilty in Quebec gasoline cartel, March 30, 2009, http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03034.html  Nadeau Poultry Farm Limited v. Groupe Westco Inc. et al., 2008 Comp. Trib. 7  Nadeau Poultry Farm Limited v. Groupe Westco Inc. et al., 2008 Comp. Trib. 16  Competition Bureau Reaches Consent Agreement with Superior Plus to Divest Propane Assets in Newfoundland, April 16, 2008, http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02657.html; Superior Plus’ Acquisition of Certain Propane Assets in Western and Central Newfoundland From Irving Oil and Irving Oil Marketing, February 25, 2009, http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02991.html.  The Commissioner of Competition v. Akzo Nobel N.V., 2008 Comp. Trib. 19  Pro-Sys Consultants Ltd. v. Infineon Technologies AG, 2008 BCSC 575  2038724 Ontario Ltd. v. Quizno’s Canada Restaurant Corp.,  O.J. No. (SCJ)  Steele v. Toyota Canada Inc.,  B.C.J. No. 1496 (BCSC)  Harmegnies v. Toyota Canada Inc.,  S.C.C.A. No. 173  Laboratoires Servier v. Apotex Inc.,  F.C.J. No. 1094 (FC)  Bouchard c. Ventes de véhicules Mitsubishi du Canada inc.,  Q.J. No. 13487 (SC)  Sun-Rype Products Ltd. v. Archer Daniels Midland Co., 2008 BCCA 278  Groupe Bio-Services inc. v. GDG Environnement Ltée,  QJ 1143.  NHL Ownership Transfer and Relocation Policies Reviewed by Competition Bureau, March 31, 2008, http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02641.html  Canadian Standard Travel Agent Registry v. International Air Transport Association, 2008 Comp. Trib. 14  Annable v. Capital Sports and Entertainment Inc., 2008 Comp. Trib. 5  Steven Olah v. Her Majesty the Queen as represented by the Correctional Service of Canada et al., 2008 Comp. Trib. 29  Maritime Travel Inc. v. Go Travel Direct.Com Inc.,  N.S.J. No. 224 (SC)  The Commissioner of Competition v. Imperial Brush Co. Ltd. and Kel Kem Ltd. (c.o.b. as Imperial Manufacturing Group), 2008 Comp. Trib. 02  The Commissioner of Competition v. Imperial Brush Co. Ltd. and Kel Kem Ltd. (c.o.b. as Imperial Manufacturing Group), 2008 Comp. Trib. 8  Jail Sentence for Deceptive Telemarketer, April 29, 2008, http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02666.html.  Pacific Bell Telephone Company v. Linkline Communications, Inc., 172 L. Ed. 2d 836