Canadian COMPETITION LAW

Economic torts (tort law).

In private civil actions under the Competition Act, “economic torts” are commonly plead together with allegations of breaches of the Competition Act.  These include unlawful interference with economic relations, common law conspiracy, unlawful interference with contractual relations and inducing breach of contract.

Economies of scale (competition/antitrust law economics).

OECD, Competition Assessment Toolkit (2011): “these arise when the overhead costs are high. Allowing for a greater scale of production leads to lower average costs per unit produced. For example, permitting larger retail stores may allow firms to reap economies of scale and have lower unit cost of providing services.”

Competition Bureau, Report, Competition in Canada from 2000 to 2020: An Economy at a Crossroads (October 19, 2023): “[Economies of scale] measure how productive smaller firms in an industry are versus larger ones. This helps indicate one possible barrier new firms face when deciding whether to enter an industry. They may have a harder time competing against larger, established firms if they are smaller and less efficient.”

Economies of scope (competition/antitrust law economics).

OECD, Competition Assessment Toolkit (2011): “where it is less costly for one firm to produce the different products or services as compared to the products being produced by separate specialized firms. For example, from a cost-efficiency standpoint, it would be efficient to allow a grocery store to sell over-the-counter medication due to cost-savings that arise from common marketing, storage and supplier contracts as opposed to regulations forcing a separation between pharmacies and grocery stores.”

Efficiencies defence (Canadian merger law).

The Competition Act provides efficiencies exceptions under the merger (section 92) and civil agreements (section 90.1) provisions of the Act, where a merger (or agreement between competitors) has brought about, or is likely to bring about, efficiency gains that will be greater than and will offset the effects of any prevention or lessening of competition that will result (or likely result) from the merger (or agreement) and that such efficiency gains would not likely be achieved if a Tribunal order were made.

See subsections 96(1) and 90.1(4).  See also Competition Bureau, Enforcement Guidelines, Competitor Collaboration Guidelines (2009).

Elastic / elasticities (competition/antitrust law economics).

Product market definition may be based on either direct (i.e., statistical) or indirect information or factors.  Demand “elasticity” is one type of direct information that can be used to consider whether two products are in the same product market, which essentially considers whether and to what extent consumers switch between between products as a result of price changes.

Competition Bureau, Merger Enforcement Guidelines (2004): “When detailed data on the prices and quantities of the relevant products and their close substitutes are available, statistical measures may be used to define relevant product markets. Demand elasticities indicate how buyers change their consumption of a product in response to changes in the product’s price (own-price elasticity) or in response to changes in the price of another identified product (cross-price elasticity). While cross-price elasticities do not in themselves directly measure the ability of a firm to raise price, they are particularly useful when determining whether differentiated products are close substitutes for one another and whether such products are part of the same relevant market.”

Product market definition may also be analyzed through the use of so-called “indirect factors”, which may include the views, strategies and behaviour of buyers, parties’ internal documents (e.g., merging parties’ views of the relevant market(s) and competition) and functional indicators (e.g., end use, physical or technical characteristics and price relationships).

Competition Bureau, Enforcement Guidelines, The Abuse of Dominance Provisions: Sections 78 and 79 of the Competition Act (2012):  “Demand elasticities indicate how buyers change their consumption of a product in response to a change in the product’s price (own-price elasticity) or in response to changes in the price of another identified product (cross-price elasticity). While cross-price elasticities do not directly measure the ability of a firm to increase price, they are particularly useful for determining whether differentiated products are substitutes for one another and whether such products are part of the same relevant market.”

Electronic message (Canadian federal anti-spam legislation (CASL)).

In general, Canada’s federal anti-spam legislation (CASL) requires that senders have express or implied consent (as defined by the legislation) to send unsolicited commercial electronic messages (CEMs) to Canadians, unless an exemption under CASL applies. With respect to “electronic messages”, CASL is technologically neutral.  It defines electronic messages as those sent by any means of telecommunication, including text, sound, voice or image messages.  As such, CASL can apply to a variety of types of electronic media, including e-mail, text messaging, instant messaging and direct messages (e.g., via social media platforms).

For more information about CASL, see: CASL (Anti-Spam Law), CASL Compliance, CASL Compliance Tips, CASL Compliance Errors, CASL FAQs, Contests and CASL.

For more information about the CASL compliance checklists and precedents that we offer for sale, see: CASL Compliance Checklists and Precedents.

Environmental agreement certificates (section 124.3, Competition Act).

As a result of amendments to the Competition Act on June 20 2024 under Bill C-59, a new mechanism was introduced allowing Canada’s Commissioner of Competition to issue environmental agreement certificates.

An environmental clearance certificate, where issued, confirms that the Commissioner is satisfied that a proposed agreement is both: (i) for the purpose of protecting the environment; and (ii) not likely to prevent or lessen competition substantially in a market (section 124.3(1), Competition Act).

Where an environmental agreement certificate is valid and registered with Canada’s federal Competition Tribunal, the following sections of the Competition Act will not apply: sections 45 (criminal conspiracy agreements), 47 (criminal bid-rigging) and 90.1 (the civil agreements provision) (section 124.5, Competition Act).

An environmental agreement certificate can, therefore, provide an exception to the conspiracy/cartel related provisions of the Competition Act where it is validly issued and registered with the Competition Tribunal, providing comfort to parties to environment-related agreements that they do not face potential criminal competition law liability.

Environmental agreement certificates can be issued by the Commissioner of Competition for up to 10 years, which can be extended for further 10-year periods on the request of the parties to an agreement (section 124.3(6), Competition Act).

For more information, see: Environmental Agreement Certificates.

“Equal dignity” / no purchase required entry option (Canadian contest/sweepstakes law).

Most, but not all, promotional contests/sweepstakes in Canada must include a no purchase required entry option (i.e., an “alternative means of entry” or “AMOE”) for contest entrants to avoid the illegal lottery offences under section 206(1) of the federal Criminal Code. One such offence, under section 206(1)(f) of the Criminal Code, makes it illegal to require a purchase or other consideration to enter into a game of chance (or mixed chance and skill) where goods, wares or merchandise is awarded as a prize(s).

As such, contest promoters in Canada commonly include some type of no purchase required entry option to enter into promotional contests. Contest sponsors have wide latitude to determine how entrants that do not purchase any product or service can enter into a contest, including offering free online entries, free paper ballots or the traditional requirement to handwrite and mail in a short essay (e.g., 50-100 words) on a topic specified by the sponsor for a free entry.

There is, however, case law in Canada that has held that no purchase entrants must be treated substantially the same as entrants that purchase a product (i.e., substantially treated the same as entrants that purchase a product or service in order to enter the contest). This is commonly referred to as the “equal dignity” requirement for contest entries. For example, in one case, a contest promoter that offered more entry ballots to entrants that paid to enter in a contest to win a car than were offered to no purchase entrants was prosecuted and convicted for violating the Criminal Code. In that case, the court held that the purported no purchase required entry option was in fact a sham and that the promotion was an illegal lottery.

In this regard, in general, private parties cannot operate lotteries in Canada unless they are charities and provincially licensed in the provinces in which they intend to operate the lottery. As such, while contest sponsors can make it somewhat more difficult for no purchase entrants to enter into a contest (e.g., by answering a short survey, mailing in an entry ballot or mailing in a handwritten essay with a stamp to enter), the risk increases the more difficult a contest sponsor makes it for no-purchase entrants to enter into a contest or if purchasers are given more entries than non-purchaser entrants.

For more information about Canadian contest/sweepstakes law, see: Contests, Contests and CASL, Contest FAQs, Contest Tips and Contests and Social Media.

For information about the Canadian contest/sweepstakes precedents (template rules) and checklists that we offer for sale, see: Canadian Contest Forms/Precedents.

Essential facilities doctrine (competition/antitrust law defence).

Robert H. Bork & J. Gregory Sidak, “What Does the Chicago School Teach About Internet Search and the Antitrust Treatment of Google?” (2012):  “The essential facilities doctrine is the unicorn of antitrust law.  Everyone knows what it looks like, but precious few have seen one in the flesh.  The Supreme Court has never endorsed the doctrine, and even in the relatively few cases in which the lower federal courts have found liability under the doctrine, there have been even fewer reported decisions explaining what the prices, terms, and conditions of forced access shall be and how the court will enforce them over time.  The essential facilities doctrine requires that the following four elements are met to establish liability: (1) control of the facility by a monopolist; (2) a competitor’s inability practically or reasonably to duplicate the facility; (3) the denial of the use of the facility to a competitor; and (4) the feasibility of providing the facility.”

OECD, Policy Roundtables, The Essential Facilities Concept (1996): “The term ‘essential facilities doctrine’ originated in commentary on United States antitrust case law and now has multiple meanings, each having to do with mandating access to something by those who do not otherwise get access.  The variations in definitions are great. … An ‘essential facilities doctrine’ (EFD) specifies when the owner(s) of an ‘essential’ or ‘bottleneck’ facility is mandated to provide access to that facility at a ‘reasonable’ price.  For example, such a doctrine may specify when a railroad must be made available on ‘reasonable’ terms to a rival rail company or an electricity transmission grid to a rival electricity generator.  The concept of ‘essential facilities’ requires that there be two markets, often expressed as an upstream market and a downstream market. … Typically, one firm is active in both markets and other firms are active or wish to become active in the downstream market.  … A downstream competitor wishes to buy an input from the integrated firm, but is refused.  An EFD defines those conditions under which the integrated firm will be mandated to supply.”

ICN, Report on the Analysis of Refusal to Deal with a Rival Under Unilateral Conduct Laws (2010): “In virtually all jurisdictions, the question of essential facilities arises when an undertaking that controls or owns a facility refuses to provide access to other undertakings allegedly to gain a competitive advantage in another market. Agencies consistently identified the principal common elements of an essential facility as: (1) access to the facility must be essential to reach customers; and (2) replication or duplication of the facility must be impossible or not reasonably feasible.”

Phillip Areeda, “Essential Facilities: An Epithet in Need of Limiting Principles”, Antitrust Law Journal 58: 841-852 (1989): “[A facility is essential when] it is both critical to [another firm’s] competitive vitality and [that other firm] is essential for competition in the marketplace.”

Evaluative factors (Canadian merger law).

Section 93 of the Competition Act contains a non-exhaustive list of evaluative factors that the Competition Tribunal may consider in determining whether a merger will prevent or substantially lessen competition.  These factors include: (i) the extent of foreign competition, (ii) whether a party has failed or is likely to fail (sometimes referred to as the “failing firm” defense), (iii) existing substitutes, (iv) barriers to entry, (v) effective remaining competition, and (vi) and whether a vigorous competitor would be removed (sometimes referred to as a “maverick”).  Specific circumstances aside, the most important of these factors are typically substitutes, barriers to entry and effective remaining competition. These factors are also typically used by the Bureau and counsel when evaluating the potential competitive effects of proposed transactions.

See e.g., Competition Bureau, Merger Enforcement Guidelines.

Exclusive dealing (competition/antitrust law).

Competition Act, subsection 77(1): “(a) any practice whereby a supplier of a product, as a condition of supplying the product to a customer, requires that customer to (i) deal only or primarily in products supplies by or designated by the supplier or the supplier’s nominee, or (ii) refrain from dealing in a specified class or kind of product except as supplied by the supplier or the nominee, and (b) any practice whereby a supplier of a product induces a customer to meet a condition set out in subparagraph (a)(i) or (ii) by offering to supply the product to the customer on more favourable terms or conditions if the customer agrees to meet the conditions set out in either of those subparagraphs.”

Competition Bureau, Pamphlet, Restricting the Supply and Use of Products: “Exclusive Dealing occurs when a supplier requires or induces a customer to deal only, or mostly, in certain products. … The exclusive dealing, tied-selling and market restriction sections of the Competition Act may apply when the following conditions are met: [1] The conduct is engaged in by a major supplier or is widespread in a market.  A firm with less than 35 percent market share is not generally considered to be a major supplier.  However, market share is only one factor that must be considered.  Others include the existence of barriers to entry that limit competition, a lack of substitute products, and lack of competition among existing suppliers.  [2] The conduct in question constitutes a practice.  Different restrictive acts considered together, as well as repeated instances of one act with one or more customers, may constitute a practice.  [3] The restrictive practice discourages a firm’s entry into, or expansion in, the market; in other words, you must show an exclusionary effect.  [4] The practice has substantially lessened competition, or is likely to do so.  This may happen when the supplier’s restrictive practice prevents, for example, a rival’s entry into the market, potential competition, product innovation or lower prices.”

For more information, see: Exclusive Dealing. See also: Abuse of Dominance.

Exclusive distribution (competition/antitrust economics).

A type of vertical restraint.

European Commission, Commission Notice, Guidelines on Vertical Restraints (2010): “In an exclusive distribution agreement, the supplier agrees to sell its products to only one distributor for resale in a particular territory. At the same time, the distributor is usually limited in its active selling into other (exclusively allocated) territories. The possible competition risks are mainly reduced intra-brand competition and market partitioning, which may facilitate price discrimination in particular. When most or all of the suppliers apply exclusive distribution, it may soften competition and facilitate collusion, both at the suppliers’ and distributors’ level. Lastly, exclusive distribution may lead to foreclosure of other distributors and therewith reduce competition at that level.”

Exclusion payment.

See Reverse Payment.

Exclusive supply (competition/antitrust economics).

A type of vertical restraint.

European Commission, Commission Notice, Guidelines on Vertical Restraints (2010): “Under the heading of exclusive supply fall those restrictions that have as their main element that the supplier is obliged or induced to sell the contract products only or mainly to one buyer, in general or for a particular use. Such restrictions may take the form of an exclusive supply obligation, restricting the supplier to sell to only one buyer for the purposes of resale or a particular use, but may for instance also take the form of quantity forcing on the supplier, where incentives are agreed between the supplier and buyer which make the former concentrate its sales mainly with one buyer. … The main competition risk of exclusive supply is anticompetitive foreclosure of other buyers.”

Existing business relationship category of implied consent (Canadian federal anti-spam legislation (CASL)).

In general, Canada’s federal anti-spam legislation (CASL) requires that senders have express or implied consent (as defined by the legislation) to send unsolicited commercial electronic messages (CEMs) to Canadians, unless an exemption under CASL applies. CASL contains an “existing business relationship” category of implied consent.  “Existing business relationships” include: (i) the purchase of products, goods, services or land within two years before a message is sent; (ii) the acceptance by the recipient of a business, investment or gaming opportunity within two years before a message is sent; and (iii) an inquiry by the recipient for products, goods, services, etc. within six months before a message is sent. For existing business relationships, however, a marketing list must be scrubbed on a rolling basis once the above dates have expired unless express consent has been obtained or another category of consent (or an exception) can be relied on. It is very important for electronic marketers to carefully review the requirements for express consent and each type of implied consent defined by the legislation.

For more information about CASL, see: CASL (Anti-Spam Law), CASL Compliance, CASL Compliance Tips, CASL Compliance Errors, CASL FAQs, Contests and CASL.

For more information about the CASL compliance checklists and precedents that we offer for sale, see: CASL Compliance Checklists and Precedents.

Explicit collusion (conspiracy/cartel law).

OECD, Policy Roundtable, Unilateral Disclosure of Information with Anti-competitive Effects (2012): “The most direct way to achieve a collusive outcome is for the firms to interact directly and agree on the optimal level of price or output.  Any form of direct contact between firms is defined as explicit (or sometimes overt) collusion.”

For more information, see: Conspiracy and Conspiracy FAQs.

Export cartel (conspiracy/cartel law).

“Export cartels” are a type of cartel (e.g., a price-fixing or market allocation agreement) between competing domestic suppliers that applies to export markets (i.e., to fix the prices, divide markets, etc. outside domestic markets).  Some countries have exceptions from their cartel laws for export cartels.  For example, while in Canada section 45 of the Competition Act makes it a criminal offence for competitors (or potential competitors) to fix prices, divide/allocate markets or restrict supply (price-fixing, market allocation and output restriction agreements), the Act contains an express exception (section 45(5)) from these offences where an agreement relates only to the export of products, subject to several qualifications.  This does not mean, however, that export cartels that are not enforced in Canada cannot be subject to enforcement or civil actions in other “effects based” jurisdictions, such as the United States.

For more information, see: Conspiracy and Conspiracy FAQs.

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