Copyright© 2010 WeComply, Inc. All rights reserved. 10/17/2015 Canadian Competition Law
Copyright© 2010 WeComply, Inc. All rights reserved. 10/17/2015 Canadian Competition Law
Copyright© 2010 WeComply, Inc. All rights reserved. 3 The Competition Act Competition Act is the oldest competition statute in western world Purposes: To promote competition, enhance economic efficiency and strengthen Canada's status globally Commissioner of Competition enforces the Act with assistance of Competition Bureau Competition Tribunal handles civil matters Cooperation agreements with U.S., E.U., Australia, New Zealand and Mexico Mutual Legal Assistance on Criminal Matters Treaty enables U.S./Canadian officials to use local criminal investigative powers on behalf of other jurisdictions
Copyright© 2010 WeComply, Inc. All rights reserved. 4 The Competition Act (cont’d) Competition Act is the oldest competition statute in western world Purposes: To promote competition, enhance economic efficiency and strengthen Canada’s status globally Commissioner of Competition enforces the Act with assistance of Competition Bureau Competition Tribunal handles civil matters Cooperation agreements with U.S., E.U, Australia, New Zealand and Mexico Mutual Legal Assistance on Criminal Matters Treaty enables U.S./Canadian officials to use local criminal investigative powers on behalf of other jurisdictions
Copyright© 2010 WeComply, Inc. All rights reserved. 5 Relationships with Competitors The Competition Act prohibits conspiring, combining, agreeing or arranging with another person to prevent or restrict competition unreasonably Red Flag #1 – Price-Fixing Most serious form of anti-competitive conduct Includes arrangements that have effect of influencing any price- related matter Red Flag #2 — Allocating Markets or Customers Agreement between competitors to allocate customers, territories or business opportunities is serious criminal offense Competitors may not agree that one will not sell in certain areas or to certain customers
Copyright© 2010 WeComply, Inc. All rights reserved. 6 Relationships with Competitors (cont’d) The Competition Act prohibits conspiring, combining, agreeing or arranging with another person to prevent or restrict competition unreasonably Red Flag #1 – Price-Fixing Most serious form of anti-competitive conduct Includes arrangements that have effect of influencing any price- related matter Red Flag #2 — Allocating Markets or Customers Agreement between competitors to allocate customers, territories or business opportunities is serious criminal offense Competitors may not agree that one will not sell in certain areas or to certain customers
Copyright© 2010 WeComply, Inc. All rights reserved. 7 In the news…
Copyright© 2010 WeComply, Inc. All rights reserved. 8 Relationships with Competitors (cont'd) Red Flag #3 — Bid-rigging Includes (a) agreement not to bid or to withdraw a bid or (b) agreement regarding the contents of a bid Red Flag #4 — Boycotts Agreement between competitors that they will (a) not do business with a certain supplier or customer or (b) do business only with certain suppliers or customers may be illegal boycott Red Flag #5 — Agreements about Product Quality or Quantity Agreements among competitors to produce a certain size or type of product violate Competition Act
Copyright© 2010 WeComply, Inc. All rights reserved. 9 Relationships with Competitors (cont'd) Red Flag #3 — Bid-rigging Includes (a) agreement not to bid or to withdraw a bid or (b) agreement regarding the contents of a bid Red Flag #4 — Boycotts Agreement between competitors that they will (a) not do business with a certain supplier or customer or (b) do business only with certain suppliers or customers may be illegal boycott Red Flag #5 — Agreements about Product Quality or Quantity Agreements among competitors to produce a certain size or type of product violate Competition Act
Copyright© 2010 WeComply, Inc. All rights reserved. 10 Special Note…
Copyright© 2010 WeComply, Inc. All rights reserved. 11 Reviewable Trade Practices Trade practices that may have substantial negative effect on competition may be reviewed by Tribunal Tribunal can issue order to cease activity Reviewable practices are civil law matters Consult with counsel before continuing or discontinuing practices in these areas Red Flag #6 – Market Restriction Occurs when supplier restricts sale of product to a defined market as condition of supplying product Tribunal will issue order to cease if competition is lessened Allowable to enable new supplier or product to enter market
Copyright© 2010 WeComply, Inc. All rights reserved. 12 Reviewable Trade Practices (cont’d) Red Flag #7 — Refusals To Deal Supplier who refuses to deal with a particular customer may be ordered to supply product on normal terms if — The product is in ample supply The refusal would restrict competition Buyer cannot obtain an adequate supply of product Buyer is willing/able to comply with normal trade terms Buyer's business is adversely affected by refusal
Copyright© 2010 WeComply, Inc. All rights reserved. 13 Reviewable Trade Practices (cont’d) Red Flag #8 — Resale Price Maintenance Company generally may choose its own customers Once customer relationship is established, certain supplier practices are reviewable Tribunal must find “adverse effect” on competition before issuing order to cease Resellers have freedom to set their own process Suppliers may compete through low-pricing policies Suggested resale prices are permissible if they are not made with coercion or inducements
Copyright© 2010 WeComply, Inc. All rights reserved. 14 Reviewable Trade Practices (cont’d) Red Flags #9 and #10 — Exclusive Dealing/Tied Selling Exclusive dealing: Requirement to buy exclusively from one supplier in exchange for special terms Tied selling: Making availability of one product contingent on purchase of another through inducement or mandate Reviewable if – They would have adverse effect on competition Supplier has major market share They would inhibit entry or growth of another company or product in market
Copyright© 2010 WeComply, Inc. All rights reserved. 15 Pop Quiz! Certain trade practices that would otherwise be illegal may be allowable to enable a new supplier or product to enter the market. A.True. B.False.
Copyright© 2010 WeComply, Inc. All rights reserved. 16 Abuse of Dominance Red Flag #11 — Abuse of Dominance Monopolies are not illegal per se Tribunal may review allegation that organization used its large market share to restrict competition substantially An abuse of dominance will be found if – Organization has dominant position or joint dominant position with another organization Dominant position was abused Abuse had effect of limiting competition substantially Penalties may be as high as C$10 million for first offense and C$15 million for second offense
Copyright© 2010 WeComply, Inc. All rights reserved. 17 Abuse of Dominance (cont’d) Red Flag #11 — Abuse of Dominance Monopolies are not illegal per se Tribunal may review allegation that organization used its large market share to restrict competition substantially An abuse of dominance will be found if – Organization has dominant position or joint dominant position with another organization Dominant position was abused Abuse had effect of limiting competition substantially Penalties may be as high as C$10 million for first offense and C$15 million for second offense
Copyright© 2010 WeComply, Inc. All rights reserved. 18 Abuse of Dominance (cont’d) Red Flag #12 — Price Discrimination Price discrimination: Granting price-related advantages to one customer that are not made available to competing customers who buy like quantity/quality Applies only to sales to competing buyers Seller may offer quantity-based discounts, as long as same discounts are offered to competing buyers Price discrimination is reviewable if it appears to be abuse of dominance Same is true for geographic price discrimination – i.e., selling product in one part of Canada at prices lower than sold elsewhere in country
Copyright© 2010 WeComply, Inc. All rights reserved. 19 Abuse of Dominance (cont’d) Red Flag #12 — Price Discrimination Price discrimination: Granting price-related advantages to one customer that are not made available to competing customers who buy like quantity/quality Applies only to sales to competing buyers Seller may offer quantity-based discounts, as long as same discounts are offered to competing buyers Price discrimination is reviewable if it appears to be abuse of dominance Same is true for geographic price discrimination – i.e., selling product in one part of Canada at prices lower than sold elsewhere in country
Copyright© 2010 WeComply, Inc. All rights reserved. 20 Abuse of Dominance (cont’d) Red Flag #13 — Predatory Pricing Predatory pricing: Selling at unreasonably low prices to drive out competition Comes under Tribunal review if it may be abuse of dominance Whether pricing product below cost is predatory depends on surrounding circumstances Red Flag #14 — Promotional Allowances Price-related promotional advantages offered to one customer but not proportionally to all competing customers are reviewable
Copyright© 2010 WeComply, Inc. All rights reserved. 21 Merger Control and Review Merger: Acquisition of control over at least a part of a competitor’s business Review initiated only by Commissioner Depending on assets and revenues involved, parties may have to alert Commissioner Parties may wait for Bureau approval or postpone closing until after waiting period Bureau can still challenge merger for up to one year Bureau may issue positive clearance in the form of an Advance Ruling Certificate or a no-action letter Bureau will determine validity of challenge to merger by considering whether it will restrict or prevent competition substantially
Copyright© 2010 WeComply, Inc. All rights reserved. 22 Merger Control and Review (cont’d) Merger: Acquisition of control over at least a part of a competitor’s business Review initiated only by Commissioner Depending on assets and revenues involved, parties may have to alert Commissioner Parties may wait for Bureau approval or postpone closing until after waiting period Bureau can still challenge merger for up to one year Bureau may issue positive clearance in the form of an Advance Ruling Certificate or a no-action letter Bureau will determine validity of challenge to merger by considering whether it will restrict or prevent competition substantially
Copyright© 2010 WeComply, Inc. All rights reserved. 23 Pop Quiz! Companies considering a merger must share information with each other so that they can accurately evaluate their prospective business opportunity. A.True. B.False.
Copyright© 2010 WeComply, Inc. All rights reserved. 10/17/2015 Final Quiz
Copyright© 2010 WeComply, Inc. All rights reserved. 10/17/2015 Questions?
Copyright© 2010 WeComply, Inc. All rights reserved. 10/17/2015 Thank you for participating! This course and the related materials were developed by WeComply, Inc. and the Association of Corporate Counsel.