Canadian COMPETITION LAW

I had a chance today to look through some of the responses to the Bureau’s public consultations on its Revised Draft Abuse of Dominance Enforcement Guidelines.  The Bureau issued new draft Abuse Guidelines for public comment on March 22, 2012.

Comments have now been posted, including by the American Bar Association (joint comments by the ABA’s Sections of Antitrust and International Law – see my earlier post: here), the National Competition Law Section of the Canadian Bar Association, Canadian Chamber of Commerce and C.D. Howe Institute Competition Policy Council.

Some of the more interesting points made in the various submissions include:

“Minimalist approach”.  Concerns have generally been expressed with the “minimalist” approach taken by the Bureau in its revised draft Guidelines, which are substantially shorter and provide conspicuously less guidance than its earlier 2009 draft.

Market power.  Recommending increased guidance on the degree of market power required to meet the “substantially or completely control” test (i.e., dominance) under the first branch of section 79.

Safe harbours.  Suggesting that the Bureau adopt bright-line safe harbours for single and joint-firm conduct of 50% and 75% (the Bureau’s position in the current draft is that a market share between 35% and 50% will not give rise to a presumption of dominance, but “may be examined by the Bureau depending on the circumstances”, in contrast but more pro-firm friendly, to its position in its earlier draft that a share of 35% or higher would normally prompt continued investigation).  The CBA Competition Section has advocated that the Bureau adopt an “unambiguous single-firm safe harbor market share threshold of 50%”.

Joint dominance.  Concerted calls for the Bureau to provide increased guidance as to what in its view will constitute joint dominance under section 79, particularly what it considers necessary to establish the requisite linkage between firms to be considered to be jointly dominant (with the CBA Competition Section suggesting that coordination or tacit agreement should be required as a minimum for a finding of joint dominance).

Anti-competitive acts, intent and business justifications.  Calling for increased guidance as to what it considers will constitute anti-competitive acts and intent, justification for a departure from established case law that an anti-competitive act must be intended to have a negative effect on a competitor and to restore guidance relating to legitimate business justifications (the subject of somewhat brief and cryptic comments by the Federal Court though significantly more commentary previously by the Bureau than in the current draft).  With respect to legitimate business justifications, the various comments criticize the considerably pared down discussion by the Bureau of what will constitute a legitimate business justification for conduct that may otherwise constitute an anti-competitive act (which has been held by the Federal Court to be one factor that may offset otherwise anti-competitive acts for the second branch of the test under section 79).

Exclusionary acts and raising rivals costs.  Criticizing the Bureau for withdrawing its previously more detailed guidance (in its 2009 draft Guidelines) relating to exclusionary acts and raising rivals’ costs.  The earlier draft Guidelines, for example, provided detailed appendices setting out conduct previously found by the Tribunal to be anti-competitive, as well as significantly more detailed discussions by the Bureau previously of anti-competitive acts.

Predatory conduct.  Suggesting that increased guidance from the Bureau would be helpful relating to its position on predatory pricing, including how it will implement a price-cost screen and situations that may not warrant enforcement.  There have only been a handful of predatory pricing cases in Canada in the past twenty-five years since the introduction of the modern Competition Act, and significant questions remain including the appropriate measure of cost and legitimate justifications for below cost pricing.

Anti-competitive effects (SLC).  Calling for increased analysis of how the Bureau will apply the “but for” test for a substantial lessening of competition, set out by Canada’s Federal Court in Canada Pipe – in the CBA Competition Section’s words, while “… the ‘but for’ analysis is conceptually simple, the practical application of this test is complex” (and remains unclear in Canada).

Examples and analysis.  Recommending that the Bureau provide more hypothetical examples.  Curiously, however, the Canadian Chamber endorsed the removal of the previous appendices, which set out summaries of past cases and which I always found rather helpful.

Language that does not accord with existing case law or section 79.  The various comments filed also question some passages of the revised draft Guidelines that appear to depart from existing case law or section 79 – for example, that an inquiry may be commenced where a firm does not possess market power (though may in the future) and that some acts not specifically directed at competitors may still be considered to have an anti-competitive purpose.

Regulated conduct defence.  Suggesting that earlier language be added once again to the current draft relating to whether (and under what circumstances) the Bureau will consider the application of Canada’s regulated conduct defence in the context of civil matters (a previously common law doctrine, now partially codified under section 45 of the Competition Act).

Administrative monetary penalties (AMPs).  Calling for additional guidance as to when the Bureau will seek AMPs.  While the current revised draft Guidelines describe when the Competition Tribunal may order AMPs, they provide no guidance as to when the Bureau may seek AMPs or factors to assess the level of AMPs.

Binding written opinions.  Requesting increased guidance in binding written opinions issued under section 124.1 of the Act – in particular, calling for the Bureau to opine not merely whether section 79 may apply to particular conduct, but how, including an assessment of the competitive effects of proposed conduct.

For copies of the submissions filed see:

Responses to the Consultation on the Abuse of Dominance Provisions (Sections 78 and 79 of the Competition Act)

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