Canadian COMPETITION LAW

Sale above advertised price (Canadian advertising/marketing law).

Competition Bureau, Ensuring Truth in Advertising, Price-related Representations: “Section 74.05 of the Competition Act is a civil provision. It prohibits the sale or rent of a product at a price higher than its advertised price. The provision does not apply if the advertised price was a mistake and the error was immediately corrected.  If a court determines that a person has engaged in conduct contrary to section 74.05, it may order the person not to engage in such conduct, to publish a corrective notice and/or to pay an administrative monetary penalty of up to $750,000 in the case of a first time occurrence by an individual and $10,000,000 in the case of a first time occurrence by a corporation. For subsequent orders, the penalties increase to a maximum of $1,000,000 in the case of an individual and $15,000,000 in the case of a corporation.”

For more information, see: Advertising Law,  Advertising Law FAQs and Misleading Advertising.

Scarcity cues (Canadian advertising/marketing law).

Canadian Competition Bureau, The Deceptive Marketing Practices Digest – Volume 6 (April 17, 2023): “Scarcity cues tell consumers when an offering — be it a price, a product or a service — is in short supply. When these claims are true, they can provide consumers important information so that they don’t miss out on a deal. When untrue, they can mislead consumers into making purchases they might not have otherwise made, or rushing them into purchases without considering competitive offers.”

For more information, see: Advertising Law,  Advertising Law FAQs and Misleading Advertising.

Scrubbing.

CRTC, National Do Not Call List: “This is an industry term that describes removing telephone numbers on the National DNCL from a telemarketer’s calling lists.”

Search, search and seizure, or “dawn raid” (conspiracy/cartel law enforcement).

In Canada, the Competition Bureau has a wide range of enforcement powers available to investigate potential civil and criminal violations of the Competition Act.  These powers include the ability to obtain search warrants, document production orders, orders compelling testimony under oath and wiretaps.  Under sections 15 and 16 of the Competition Act, the Bureau has the power to obtain search warrants to search premises and seize a wide range of hardcopy and electronic “records” (including computer records, computers, phones, etc.).  The Bureau may obtain a search warrant on an ex parte basis (i.e., without notice to the target) where it shows that there are reasonable grounds that a criminal offence has been (or is about to be) committed under the Competition Act; there are grounds to make an order under the deceptive marketing or reviewable matters sections of the Competition Act; or a Competition Act order has been contravened under certain sections of the Act.  Particular sections of the Act provide for the contents of warrants, warrantless searches in some cases, computer searches, the Bureau’s obligations with seized records and access to records and procedures for dealing with documents that may be subject to solicitor-client privilege.  A search and seizure typically involves Bureau officers appearing without warning and demanding access to hardcopy or electronic records.  Searches generally extend over several days, can involve multiple individuals and locations and can be stressful, disruptive and intrusive.  Search and seizures also can raise complicated issues, principally how to safeguard solicitor-client privilege, dealing with cross-border production issues or a company’s rights without crossing the line into potential obstruction (which can result in significant criminal penalties).  In some jurisdictions, such as the European Union, search and seizures by competition law officials are called “dawn raids”.

American Bar Association, Section of Antitrust Law, Antitrust Compliance: Perspectives and Resources for Corporate Counselors, 2^nd ed. (2010), p. 214:  “A ‘dawn raid’ refers to an inspection by an antitrust authority (such as DG Competition of the European Commission in Brussels or the United States Department of Justice (the DOJ)), usually conducted without prior notice to the company or individuals being inspected.  Contrary to what the name suggests, dawn raids are in practice carried out during business hours although they typically start very early in the day.  This timing is not by accident: the raid is scheduled to occur when the fewest number of people are in the building, thereby increasing the surprise element and minimizing the risk of documents being destroyed or competitors being tipped-off that raids are happening.”

Secondary-line price discrimination.

Fundamentals of Canadian Competition Law, 2^nd ed. (Canadian Bar Association):  “Secondary-line price discrimination is discrimination by a supplier in pricing to customer purchasers, as targeted by the price discrimination provisions previously found in paragraph 50(1)(a)” of the Competition Act [which was repealed in 2009].

Selective distribution.

A type of vertical restraint.

European Commission, Guidelines on Vertical Restraints: “Selective distribution agreements, like exclusive distribution agreements, restrict the number of authorised distributors, on the one hand, and the possibilities of resale on the other. The difference vis-à-vis exclusive distribution is that the restriction of the number of dealers does not depend on the number of territories but on selection criteria linked in the first place to the nature of the product. Another difference vis-à-vis exclusive distribution is that the restriction on resale is not a restriction on active selling to a territory but a restriction on any sales to non-authorised distributors, leaving only appointed dealers and final customers as possible buyers. Selective distribution is almost always used to distribute branded final products. The possible competition risks are a reduction in intra-brand competition and, especially in cases of cumulative effect, foreclosure of a certain type or types of distributor and facilitation of collusion between suppliers or buyers.”

Sender identification information (Canadian anti-spam law (CASL)).

Under Canada’s federal anti-spam legislation, the following information must be clearly and prominently included in commercial electronic messages (CEMs) that are subject to CASL: (i) the name (or DBA name if different) of the sender; (ii) if a CEM is sent on behalf of other person (e.g., affiliate or third party), their name (or DBA name if different); (iii) if a CEM is sent on behalf of another person, state which person is sending the message and on whose behalf it is being sent; (iv) the mailing address (which must be valid for a minimum of 60 days after the CEM is sent) and at least one of the following for the sender or, if different, the person on whose behalf it is sent: phone number, e-mail address or web address (which can be provided in the CEM itself or via a web link); and (v) a conspicuously posted un-subscribe mechanism.

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.

Service standard periods. 

In addition to the statutory waiting periods for notifiable mergers under the Competition Act, the Bureau has also established non-statutory service standards for merger reviews.  The Bureau’s service standard periods for pre-merger notification filings and advance ruling certificate (“ARC”) applications are as follows: (i) non-complex transactions – up to 14 days from the day on which sufficient information has been received by the Commissioner to assign a complexity designation; (ii) complex transactions – up to 45 days from the day on which sufficient information has been received by the Commissioner to assign a complexity designation, except where a supplementary information request (“SIR”) is issued, in which case it is 30 days from the day on which the information requested by the Commissioner has been received from all SIR recipients (coinciding with the statutory 30 day waiting period for second phase reviews).

Sherman Act (U.S. federal antitrust legislation).

Federal U.S. antitrust legislation that prohibits and regulates, among other things, cartels and monopolies  (Sherman Act, July 2, 1890, ch. 647, 26 Stat. 209, 15 U.S.C. §§ 1-7).  Section 1 of the Sherman Act prohibits unreasonable restraints of trade, including price-fixing agreements.

Northern Pacific Railway v. United States, 356 U.S. 1 (1958):  “The Sherman Act was designed to be a comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade.  It rests on the premise that the unrestrained interaction of competitive forces will yield the best allocation of our economic resources, the lowest prices, the highest quality and the greatest material progress, while at the same time providing an environment conducive to the  preservation of our democratic political and social institutions.  But even were that premise open to question, the policy unequivocally laid down by the Act is competition.”

U.S. Federal Trade Commission, FTC Guide to the Antitrust Laws:  “The Sherman Act does not prohibit everyrestraint of trade, only those that are unreasonable.  For instance, in some sense, an agreement between two individuals to form a partnership restrains trade, but may not do so unreasonably, and thus may be lawful under the antitrust laws.  On the other hand, certain acts are considered so harmful to competition that they are almost always illegal.  These include plain arrangements among competing individuals or businesses to fix prices, divide markets, or rig bids.  These acts are ‘per se’ violations of the Sherman Act; in other words, no defense or justification is allowed.”

The Sherman Act imposes criminal penalties of up to USD $100 million for a corporation and USD $1 million for an individual, together with up to 10 years in prison.

U.S. Department of Justice, Antitrust Division, Antitrust Laws and You: “[The Sherman Act] outlaws all contracts, combinations, and conspiracies that unreasonably restrain interstate and foreign trade.  This includes agreements among competitors to fix prices, rig bids, and allocate customers, which are punishable as criminal felonies.  The Sherman Act also makes it a crime to monopolize any part of interstate commerce.  An unlawful monopoly exists when one firm controls the market for a product or service, and it has obtained that market power, not because its product or service is superior to others, but by suppressing competition with anticompetitive conduct.”

Shill bidding (bid-rigging law).

New Zealand Commerce Commission: “In online auctions, shill bidding is the practice of selling goods under one membership, but bidding on them with other memberships controlled by or related to the vendor. Shill bidding is illegal because it misleads the public about the price of goods by manipulating the bids placed by genuine auction bidders.”

For more information, see: Bid-Rigging.

“Short rules” or “mini rules” (Canadian contest/sweepstakes law).

Canada’s federal Competition Act requires that certain disclosures be made when conducting “any contest, lottery, game of chance or skill, or mixed chance and skill, or otherwise [disposing] of any product or other benefit …” Key Competition Act requirements include: (i) disclosing the number and approximate value of prizes, (ii) disclosing the area (or areas) to which they relate and (iii) any fact that may materially affect the odds of winning. The Competition Act also prohibits contest organizers from “unduly delaying” the award of prizes. Based on these requirements, most contest organizers provide short rules or “mini rules” in all point-of-purchase materials regardless of media (i.e., in all print, online and other electronic media), with long rules (i.e., official contest rules) available on request and commonly posted on the sponsor’s website.  Point-of-purchase disclosure (short rules) commonly includes both the required statutory disclosure and other key contest elements. While short, and usually straightforward, it is important that the mandatory statutory disclosure be drafted precisely and correctly.  It is also important that the timing for the launch of a contest and accompanying promotional materials ensure that the necessary disclosure is included in point-of-purchase and similar marketing materials where entrants first see a contest promoted.

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.

Signalling (Competition law / conspiracy law term)

Jensen v. Samsung Electronics Co. Ltd., 2021 FC 1185, 2021 (F.C.), at paras 112-14: “112 I make one last comment on the issue of ‘signalling’ at the centre of the Plaintiffs’ allegations of a section 45 conspiracy in this case. Relying on Atlantic Sugar and Gosselin c R, 2017 QCCA 244 [, the Plaintiffs submit that ‘public signalling’ is recognized by Canadian law as constituting a breach of section 45 or its predecessor provisions. With respect, this is an incorrect statement of the law. Just as no case has ever recognized that conscious parallelism amounted to a prohibited conspiracy under the Act, I am unaware of any precedent in Canada which has recognized that unilateral ‘public signalling,’ in and of itself, can amount to a conspiracy prohibited by section 45. In fact, neither of the two cases cited by the Plaintiffs offers any support for that proposition.

113      As indicated above, Atlantic Sugar has confirmed that unilateral conduct is not caught by the conspiracy provision of the Act. To the extent that Atlantic Sugar could be considered as a ‘signalling’ case, it makes it clear that there cannot be an unlawful agreement under section 45 without some form of two-way communications between the co-conspirators, involving an offer or invitation and some conduct from which acceptance of the offer may be inferred. Turning to the Gosselin case, it does not provide any useful assistance. This case was not one of price signalling or conscious parallelism, as the existence of the conspiracy in that matter had been proven with extensive wiretap evidence obtained through electronic surveillance, revealing ongoing communications and express agreements between the competitors in the retail gasoline industry in a region of Quebec. Moreover, there were guilty pleas entered by some of the co-accused and the existence of a conspiracy had been clearly admitted. In fact, in that case, the trial judge rejected the defence of ‘conscious parallelism’ advanced by the defendant in light of the extensive evidence of discussions and conversations between the competitors confirming the existence of an actual agreement (Gosselin at paras 58-60).

114      The Plaintiffs also mentioned the Fanshawe case as an example where the court allegedly relied on public statements and findings in other proceedings. However, in that case, the defendants had pleaded guilty to a price-fixing conspiracy, and no finding was made on any issue related to public signalling.”

Significant interest (Canadian merger control law).

The definition of “merger” under section 91 of the Competition Act includes acquisitions of both control over or a “significant interest” in a business.

Competition Bureau, Merger Enforcement Guidelines:  “[t]he Act does not define what constitutes a ‘significant interest,’ as referenced in section 91, leaving this concept to be construed within the broader context of the Act as a whole. … When determining whether an interest is significant, the Bureau considers both the quantitative nature and qualitative impact of the acquisition or establishment of the interest. Given that the Act is concerned with firms’ competitive market behaviour, a ‘significant interest’ in the whole or a part of a business is held qualitatively when the person acquiring or establishing the interest (the ‘acquirer’) obtains the ability to materially influence the economic behaviour of the target business, including but not limited to decisions relating to pricing, purchasing, distribution, marketing, investment, financing and the licensing of intellectual property rights.”

Single branding.

A type of vertical restraint.

European Commission, Guidelines on Vertical Restraints: “Single branding results from an obligation or incentive which makes the buyer purchase practically all his requirements on a particular market from only one supplier. It does not mean that the buyer can only buy directly from the supplier but that he will not buy and resell or incorporate competing goods or services. The possible competition risks are foreclosure of the market to competing and potential suppliers, facilitation of collusion between suppliers in cases of cumulative use and, where the buyer is a retailer selling to final consumers, a loss of in-store inter-brand competition.”

Single monopoly profit theorem.

C. Ahlborn, D.S. Evans & Jorge Padilla, “The antitrust economics of tying: a farewell to per se illegality”: “The second central insight of the Chicago school is that a firm enjoying monopoly power in one market (the market for the tying good) could not increase its profits, and instead could reduce them, by monopolizing the market for another good (the market for the tied good). This idea is commonly referred as the ‘single monopoly profit theorem,’ and in principle applies to cases where the demands for the two goods are both independent and complementary. This theorem does not say that monopolists will not engage in tying and bundling.  Nor does it say that monopolists cannot make greater profits by tying and bundling. Rather, what it says is that monopolists cannot secure greater profit merely by leveraging their monopoly from one market to another and that they must be engaging in tying and bundling to improve quality or lower cost (i.e. improve efficiency).”

Hedvig Schmidt, Competition Law, Innovation and Antitrust: An Analysis of Tying and Technological Integration (2009): “The traditional pre-Chicago School theory held that two monopolies would create two monopoly profits and therefore be more harmful than one monopoly.  ‘If one monopoly is bad, surely two monopolies are worse.’  Scholars associated with the Chicago School have argued against such ideas, contending that when two products are combined and applied together there is only one product, and therefore only one monopoly to be exploited.  The full monopoly profits can be extracted from one of the products without excluding competitors in the market for the complementary product.  This theory is known as the single monopoly profit theorem or, as Bork calls it, the fallacy of double counting.  As Posner explains: ‘A [fatal] weakness of the leverage theory is its inability to explain why the firm with a monopoly of one product would want to monopolize complementary products as well.  It may seem obvious that two monopolies are better than one, but since the products are by hypothesis used in conjunction with one another … it is not obvious at all.  If the price of the tied product is higher than the purchaser would have had to pay in the open market, the difference will represent an increase in the price of the final product or service to him, and he will demand less of it, and will therefore buy less of the tying product.’  Ahlborn et al. argue that the single monopoly profit theorem merely holds that greater profit cannot be made through leveraging alone; the company must also create efficiencies via the tying arrangement, such as improvement of product quality or lower costs.  However, as Peritz notes, the leverage theory is dynamic, because the tying strategy is working over time attempting to achieve certain results in the future.  In comparison, the single monopoly profit theorem is a static theory, and thus the arguments raised by Bork and Posner are true in a static short-run pricing theory model, but in a long-run model the consequences of tying may be more severe.”

Six resident complaint (Canadian competition law enforcement).

Under section 9 of the Competition Act, any six residents in Canada that are age of majority and of the view that grounds exist for an order under Part VII.1 or VIII of the Act or that an offence has been committed under Part VI or VII of the Act may apply to the Commissioner of Competition to commence an inquiry.  Six resident complaints require the filing of a statutory declaration together with a brief of the alleged violations.  Upon receiving a six resident complaint, the Commissioner must commence an inquiry.  As such, six resident complaints are one mechanism to make the Commissioner commence an inquiry where the Commissioner has not acted on a regular complaint.  Having said that, while six resident complaints can be one way to apply pressure to opposing parties and/or cause the Bureau to commence an inquiry where it may not have done so otherwise, the Bureau may nevertheless choose to discontinue any inquiry commenced – in other words, there is no guarantee the Bureau will ultimately take enforcement steps once a six resident complaint has been filed (and the Bureau may discontinue an inquiry once commenced).

For more information, see: Canadian Competition Law Enforcement.

Skill contest (Canadian contest/sweepstakes law).

A type of contest in which winners are chosen by skill not chance.  In Canada, illegal lottery offences under the federal Criminal Code prohibit, among other things, awarding property by chance or awarding goods, wares or merchandise by chance or mixed skill and chance, where entrants pay to play (or provide other valuable consideration).  As such, pure skill contests can be one way to include a purchase requirement for a promotion without violating the Criminal Code.

U.S. Federal Trade Commission: “Skill contests [are] puzzles, games or other contests in which prizes are awarded based on skill, knowledge or talent – not on chance.  Contestants might be required to write a jingle, solve a puzzle or answer questions correctly to win.”

B. Pritchard & S. Vogt, Advertising and Marketing Law in Canada, 4^th ed. (Toronto: LexisNexis, 2012): “Contests can be divided into two broad categories: skill contests and contests where prizes are awarded randomly.  Until recently, skill contests – where winners are selected by experienced judges based on the contestants’ skill at story-writing, photography, etc. – were much less common.  Contests where winners are chosen at random include: sweepstakes where prizes are awarded by random draw; seeded games (including Coke’s ‘under the bottle cap’ promotions and Tim Hortons’ ‘Roll Up The Rim To Win’), where prizes are randomly seeded on game cards or on-pack, and participants must scratch, unpeel or otherwise reveal the prize area to discover whether they have won a prize;  online instant win games where consumers enter a code number (usually obtained on-pack); and ‘match and win’ games where participants must collect game pieces to spell specific words or match the pieces of a puzzle.”

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.

Skill testing question (Canadian contest/sweepstakes law).

Skill testing questions are commonly included in promotional contests in Canada in an effort to remove the chance element from a contest.  This is because at common law, illegal lotteries were generally defined as consisting of three elements: (i) chance, (ii) consideration (i.e., typically a cash entry requirement) and (iii) a prize (which offences have been codified in the Federal Criminal Code).

As such, based on these illegal lotteries offences, many contest organizers will often elect to remove either the consideration element (e.g., by offering a “no purchase necessary” entry option), chance element (e.g., including a mathematical skill testing question requirement to win or making a contest entirely a skill-based promotion), or both.

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.

Slander.

Canadian Bar Association, “Defamation: Libel and Slander” (online): “Slander is the type of defamation with no permanent record.  Normally it’s a spoken statement.  It can also be a hand gesture or something similar.  The law treats slander differently than libel: with slander, you have to prove you suffered damages, in the form of financial loss, to get compensation.  But with libel, the law presumes you suffered damages.  For example, say that Bill told John you were a cheat, and then John refused to do business with you because of that.  You sue Bill and prove that you lost business with John because of what Bill said.  Bill would have to pay you for the loss of John’s business, but not for the general damage to your reputation.  It can be very hard to prove this sort of financial loss.  That’s why most slander cases never go to court.  But in the following four examples, a slander lawsuit may succeed without your proving financial loss.  Even though there’s no permanent record of the slander, the law will presume damages, as if it were libel, if someone: accuses you of a crime (unless they made the accusation to the police); accuses you of having a contagious disease; makes negative remarks about you in your trade or business; or accuses you of adultery.”

Social proof tactics (advertising/marketing).

An adverting/marketing strategy to generate sales.

Competition Bureau, The Deceptive Marketing Practices Digest, Volume 6 (April 17, 2023): “Businesses can also add so-called social proof tactics to the mix [in addition to scarcity clues] using various methods to let consumers know that other consumers like or want the same product. Social proof can be used to suggest there is high demand for a product and/or that the product is highly attractive or desirable. The sense of urgency is compounded when a consumer believes a product is both scarce and in high demand.”

Sovereign wealth fund.

Marc LeBlanc, Industry, Infrastructure and Resources Division, Parliament of Canada, “Sovereign Wealth Funds: International and Canadian Policy Responses” (February 9, 2010): “SWFs are special-purpose investment funds owned by governments; typically, they are created to reinvest foreign exchange reserves.  SWFs are often considered separate from the government or central bank funds that are used to conduct balance-of-payment operations or to manage government employee pension funds.  SWFs were initially created by oil-rich nations to mitigate the impact of volatile oil prices on their domestic currencies. SWFs also help governments save for future generations or for leaner times by converting non-renewable resources into a stable income source.  Today, most SWFs seek to diversify national assets and reduce the opportunity costs of holding relatively low-interest foreign debt by pursuing investments with higher rates of return. These SWFs have high-risk tolerances and long investment horizons and tend to be invested in foreign equity and financial markets. As foreign reserves continue to grow, these SWFs are emerging as a new type of international investor.  There are various types of SWFs, and many operate with multiple policy objectives. Differences in stated objectives, governance and management policy, investment strategy, risk/return profiles and regulatory constraints are reflected in the types of assets acquired by each fund.  There are also wide differences in levels of transparency, as SWFs are not publicly listed on stock exchanges and are not obligated to disclose their holdings or strategies.”

Spam.   

Government of Canada, Canada’s Anti-Spam Legislation: “Spam is considered to be any unsolicited commercial electronic message. It is often a source of scams, computer viruses and offensive content that takes up valuable time and increases costs for consumers, business and governments.”

Industry Canada, The Digital Economy in Canada: “Although there is no internationally agreed-upon definition of “spam”, many countries consider it to be any bulk commercial email sent without the express consent of recipients. Spam is no longer just a nuisance, but has quickly evolved into a vehicle for malware, threats to privacy, scams, fraud and misleading trade practices, such as phishing. It is now estimated that spam represents more than 80% of all e-mail traffic. Processing and managing spam creates costs that are ultimately paid for by businesses and personal e-mail users.”

OECD Task Force on Spam: Anti-spam Toolkit of Recommended Policies and Measures (2006): “There is no internationally agreed definition of spam, which is defined differently in national legislative approaches. For this reason the Task Force has not attempted to classify spam. Nevertheless, there are common characteristics that countries have recognized in their definitions: (i) electronic message: spam messages are sent electronically. While e-mail is by far the most significant channel for spam, other delivery channels are also considered in a number of countries (mobile spam, such as SMS and MMS, spam over IP, etc); (ii) hidden or false message origins: spam messages are often sent in a manner that disguises the originator by using false header information. Spammers frequently use un-authorized third-party e-mail servers; (iii) spam does not offer a valid and functional address to which recipients may send messages opting out of receiving further unsolicited messages; (iv) illegal or offensive content: spam is frequently a vehicle for fraudulent or deceptive content, viruses, etc. Other spam includes adult or offensive content, which may be illegal in some countries, especially if it is sent to minors; (v) utilization of addresses without the owner’s consent: Spammers often use e-mail addresses that have been collected without the owner’s explicit consent. This is frequently done through software programs which gather addresses from the Web or create e-mail addresses (harvesting and dictionary attacks); (vi) bulk and repetitive: spam messages are typically sent in bulk in an indiscriminate manner, without any knowledge about the recipient other than the e-mail address. In conclusion, there is a common understanding that spam is a threat to the Internet as an effective and reliable means of communication, and for the overall evolution of the e-economy. This common understanding has led to calls for greater co-operation among all stakeholders in finding common solutions to spam.”

For more information about CASL, see: CASL, CASL Compliance , CASL Compliance Tips, CASL FAQs, CASL Compliance Errors and Contests and CASL.

For CASL compliance checklists and precedents that we offer for sale, see: Anti-Spam Law (CASL) Precedents.

Spear phishing (fraud).

Government of Canada, Canadian Anti-Fraud Centre, “Financial Crime Trend Bulletin: Spear Phishing” (2013): “Phishing is a term for e-mails, websites or even text messages that are created and disseminated by fraudsters to ‘trick’ a person into supplying their personal information (usually user name and password).  The intent is that you will think the communication is from your bank / credit union, a business (like an upgrading request from your Google / MSN / Yahoo security) or a government institution (i.e., Canada revenue Agency) and you will trust the communication to the extent that you supply personal data.  Where a phishing email is disseminated to a random audience composed of as many email addresses collected as possible, a spear phishing email has a more selective audience. This time the fraudster has been able to collect some type of information identifying certain groups of people as having a common link.  Perhaps a company has been hacked or it could be a collection of information done through the internet (Blogs / chat groups / social networking sites).  The result is a selection of email addresses associated to a known commodity.  It could be a bank, a company or even an educational facility.  Generally there is a link in the email leading you to a very authentic looking website where you are asked to confirm or supply personal information.  Because you are at the onset familiar with the company or organization you are not alarmed and the website is very official looking so you are less likely to see a red flag that should be there.”

Globe and Mail:  “In addition to such attacks, criminals have increasingly deployed so-called ‘spear phishing,’ or highly targeted scam e-mails. Rather than sending out generic e-mails to millions of users in the hope that a small percentage of them might fall for the con, spear phishing attacks tend to focus on just one user, who is usually a company executive. Such e-mails often contain detailed pieces of personal information about the recipient and their workplace, usually drawn from social networks such as LinkedIn. The goal is to convince the recipient that the e-mail is from a trusted source.”

“Sponsored content” or “native advertising” (advertising/marketing law).

U.S. Federal Trade Commission: “The practice of blending advertisements with news, entertainment, and other content in digital media.”

Spoofed website (fraud).

Competition Bureau, Fraud Facts 2017: “A spoofed website is a site that uses deceptive means to mislead consumers into thinking that it represents a specific business, financial institution, government or charity. These websites generally imitate the real websites to sell products or services that may or may not be authentic, or to obtain sensitive financial or personal information from users. Often they will provide enough information to appear like the real thing, including the location of stores, phone numbers, terms and conditions, and logos.”

Spoofing (fraud).

Industry Canada: “Businesses are victimized by the counterfeiting of business websites to defraud individuals and businesses.”

Spyware (fraud). 

Government of Canada, Canada’s Anti-spam Legislation: “Spyware is software that has been installed on your computer without your consent. It is most often used to obtain personal information by monitoring or controlling your computer.”

Industry Canada, The Digital Economy in Canada: “Spyware is software that collects information about a user without the user’s knowledge or consent. It may also be software that modifies the operation of a user’s computer without the user’s knowledge or consent. Typical kinds of spyware include keyloggers, which send a list to a third party of the keys that a user pressed, and adware, which displays to the user advertisements selected by the adware’s owner.”

RCMP, Internet Security:  “Spyware is software that gathers information about people without their knowledge.  Generally speaking, it tracks your movements and habits on the Web and sends the information to advertising companies.  They use the information to create marketing profiles thus helping them to market their products better.  Spyware is sometimes included in free software (also known as shareware) that is downloaded from the Internet.  Often there are long license agreements (which few people read) stating that you agree to the software gathering information about your habits and sending it back to the company’s Web site.  Spyware can also find its way onto your computer via a virus.   Cookies also gather personal information about a user, but they are not considered spyware because they are not hidden.  Users can disallow cookies at any time if they choose to do so.   The use of spyware is common practice in informatics.  Even though this practice is not highly appreciated, it is not illegal and software manufacturers do not, as a rule, have criminal intent.  We suggest that you contact the manufacturer to express your apprehension and comments.  If you are not satisfied with the manufacturer’s reply, you still have the option to not use the software.  There still are basic precautions that you can take to avoid that your computer become infected by spyware.  This will also reduce the number of pop-up ads you receive.”

Squeezing (monopolization / abuse of dominance law).  

International Competition Network (ICN), Report on the Analysis of Refusal to Deal with a Rival Under Unilateral Conduct Laws (April, 2010): “… when a dominant firm charges a price for an input in an upstream market that, compared to the price it charges for the final good using the input in the downstream market, does not allow a rival in the downstream market to compete.”

Pietro Crocioni and Centro Veljanovski, “Price Squeezes, Foreclosure and Competition Law: Principles and Guidelines”:  “A price or margin squeeze is an exclusionary practice used by a vertically integrated firm to leverage its market power in the upstream market to squeeze the margins of its downstream competitors.”

Competition Act, subparagraph 78(1)(a): “For the purposes of section 79 [abuse of dominant position] ‘anti-competitive act’, without restricting the generality of the term, includes any of the following acts: (a) squeezing, by a vertically integrated supplier, of the margin available to an unintegrated customer who competes with the supplier, for the purpose of preventing the customer’s entry into, or expansion in, a market.”

OECD, Policy Roundtables, Margin Squeeze (2009): “A margin squeeze occurs when there is such a narrow margin between an integrated provider’s price for selling essential inputs to a rival and its downstream price that the rival cannot survive or effectively compete. A margin squeeze can arise only when (a) an upstream firm produces an input for which there are no good economic substitutes, (b) the upstream firm sells that input to one or more downstream firms and (c) the upstream firm also directly competes in that downstream market against those firms.  Many countries have investigated margin squeeze cases, particularly in newly liberalised sectors such as telecommunications.  In order for a margin squeeze case to arise, three elements must be present. First, an upstream firm must produce an essential or bottleneck input with no substitutes and no scope for other firms to provide the essential input themselves. Second, that firm must sell that essential input to one or more downstream firms which seek to use that input in the provision of some downstream product or service. Third, the upstream firm must itself use its own input to compete against those downstream firms in the market for that downstream product or service.”

Erik N. Hovenkamp and Herbert Hovenkamp, “The Visibility of Antirust Price Squeeze Claims”, Arizona Law Review 51: 273-303 (2009): “[A price squeeze occurs when] a vertically integrated firm ‘squeezes’ a rival’s margins between a high wholesale price for an essential input sold to the rival and a low output price to consumers for whom the two firms compete.”

Standardization agreement.

European Commission, Guidelines on horizontal cooperation agreements (2011): “Standardisation agreements have as their primary objective the definition of technical or quality requirements with which current or future products, production processes, services or methods may comply.  Standardisation agreements can cover various issues, such as standardisation of different grades or sizes of a particular product or technical specifications in product or services markets where compatibility and interoperability with other products or systems is essential. The terms of access to a particular quality mark or for approval by a regulatory body can also be regarded as a standard.”

State action doctrine (antitrust law defence).

An analogous doctrine to the regulated conduct defence in Canada (see Regulated conduct defence).

G.S. Cary, et al., “The Case for Antitrust Law to Police the Patent Holdup Problem in Standard Setting”:  “Under the state-action doctrine, a state does not violate the Sherman Act when it exercises its police power in a manner that restricts competition within its borders.  State-action immunity is not a doctrine created by the Court’s desire to defer to regulatory regimes. In the state-action decisions, the Court did not conclude that state regulatory regimes were superior to antitrust remedies but rather held that, due to principles of dual-sovereignty in our federalist system, Congress did not intend to interfere with those regimes when it enacted the antitrust laws. Hardly evidencing a preference for state regulation in general, the doctrine is limited in scope. In general, private conduct pursuant to the state scheme is immunized only where there is a clear articulation of state policy to displace competition with regulation and the state actively supervises that conduct.”

State owned enterprise.

In December 2007, the Minister of Industry first issued new guidelines under the Investment Canada Act that apply to the acquisition of Canadian businesses by foreign state-owned enterprises (“SOEs”).  These SOE guidelines were updated in December, 2012.

Industry Canada, Guidelines – Investment by State-owned Enterprises – Net benefit assessment (2012): “For the purposes of these guidelines, an SOE is an enterprise that is owned, controlled or influenced, directly or indirectly by a foreign government.”

“Straw man scheme”.

A type of political contribution fraud to circumvent political donation laws.  In a “straw man” scheme, persons that are permitted to make donations (“straw men”) make donations to a political party, and are reimbursed or compensated by other persons that are not permitted, may have exceeded contribution limits, etc.

Structural remedy (merger control law).

Merger remedies are usually thought of as one of three types: (i) structural, (ii) behavioural or (iii) combination.  A structural remedy involves the divestiture (sale) of assets to a third party that can be used to carry on part of the merged business to provide effective competition to the merged entity post-merger, blocking a transaction or dissolution of a transaction.  The Bureau has taken the position in the past that because mergers involve a structural change to a market, a structural remedy is usually the most appropriate type of remedy to impose (and prefers structural remedies over behavioural or combination remedies).

Competition Bureau, Information Bulletin on Merger Remedies in Canada (2006): “The anti-competitive effects that are likely to arise from a merger result from a structural change to the market.  Unless structural changes that have harmful effects on competition are challenged, they are often long lasting and can adversely affect innovation, economic performance and consumer welfare.  Accordingly, structural remedies are usually necessary to eliminate the substantial lessening or prevention of competition arising from a merger. … Most structural remedies involve a divestiture of asset(s) rather than an outright prohibition or dissolution of the merger.”

Competition Bureau, in OECD, Policy Roundtables, Paper, Remedies in Merger Cases (2011): “The Bureau strongly prefers structural remedial measures, whether alone or in conjunction with behavioural or quasi-structural elements that complement the primary structural remedial measure.  Structural remedies are seen as being more effective than behavioural remedies for a number of reasons, including the cost and certainty associated with the remedy.  Generally, the terms of structural remedies are clearer, more certain and often readily enforceable, and less costly to administer than those of behavioural remedies.  Although the divestiture of assets is the most common form of structural remedy used by the Bureau, alternate structural remedies include the prohibition or dissolution of a merger, which may be required when divestiture(s) or other less intrusive remedies are unavailable. Between 2006 and 2011, approximately 80% of registered consent agreements contained a structural remedy.  The Bureau recognizes that, in order to be effective, divestitures must not only be of sufficient quality, but must also be of sufficient breadth and scope, in that they include all assets necessary for the purchaser to be a long-term competitor that will compete effectively in the relevant market(s).  Structural remedies observed by the Bureau to have been of sufficient scope tend to involve the divestiture of stand-alone businesses and/or clean sweeps.  To ensure that a divestiture includes all assets necessary for a purchaser to be an effective long-term competitor, the Bureau employs a variety of mechanisms to preserve the competitive viability of the assets to be divested during the sales period. These include: timely initial sales periods; hold separate, maintenance and reporting requirements; the appointment of a hold separate manager; and the appointment of a monitor to ensure the merged entity and hold separate manager comply with the terms of the consent agreement.”

OECD, Policy Roundtables, Paper, Remedies in Merger Cases (2011): “Remedies are used by competition agencies to resolve and prevent the harm to the competitive process that may result as a consequence of a merger. They allow for the approval of mergers that would otherwise have been prohibited, by eliminating the risks that a given transaction may pose to competition. As such, they play an essential role in the merger review process, and their careful crafting is of the utmost importance to the competition agencies carrying out the review.  Merger remedies are generally classified as either structural, if they require the divestiture of an asset, or behavioural, if they impose an obligation on the merged entity to engage in, or refrain from, a certain conduct. Structural remedies may include both the sale of a physical part of a business or the transfer or licensing of intellectual property rights. They can be imposed either as a condition precedent to a merger, or their completion may be required within a certain period from the approval of the merger. Behavioural remedies, on the other hand, are always forward looking in that they consist of limits on future business behaviour or an obligation to perform a specific prescribed conduct for a given, sometimes considerable, period of time following the consummation of the merger. They often consist of non-discrimination obligations, firewall provisions or non-retaliation or transparency provisions or contracting limitations. … Generally, the benefits of structural remedies are of a one-off nature (which eliminates the need for subsequent long-term monitoring) and of relatively straightforward character. Their drawbacks, on the other hand, include high costs to the merging parties, potential disruption to relationship with customers, and their irreversibility (given the fact that some of the feared competitive risks are transitory).”

See also definitions of “behavioural remedy” and “combination remedy”.

Structure conduct performance paradigm.

One economic theory as to why cartels form.

J.K. Ashton & A.D. Pressey, “Who Manages Cartels? The Role of Sales and Marketing Managers within International Cartels: Evidence from the European Union 1990-2009”: “The structure conduct performance paradigm emphasises the importance of market structure, particularly the size and number of market incumbents in determining the formation of cartels.  It is proposed that the complexity of monitoring co-conspirators causes cartels to form in markets with few participants … While most cartels do form in relatively concentrated industries many exceptions exist … and cartel pricing behaviours are often observed to strongly deviate from such established economic explanations … Further, when markets are highly concentrated firms may not need to form a cartel and can tacitly follow the price movements of competitors effectively reducing price competition … Cartels therefore involving many members have also been associated with trade associations to facilitate the coordination of cartel actions and the use of threats to punish cartel ‘cheaters’.”

Subcontracting (Canadian bid-rigging law).

There are a number of types of bid-rigging that can contravene the criminal bid-rigging provisions of the Competition Act under section 47.  These include “subcontracting”, where parties that agree not to submit a bid (or submit a losing bid) are awarded subcontracts or supply agreements from the successful low bidder.

For more information, see: Bid-Rigging.

Subscription trap (fraud / misleading advertising).

Competition Bureau, News Release, “Competition Bureau Announces its Top 2 on “2 Good 2 B True Day” (March 12, 2013): “[Subscription traps are] deceptive techniques designed to trick consumers and businesses into registering for recurring fees for goods or services … Consumers and businesses often do not become aware of subscription traps until they receive a bill or money is taken from their account.  Subscription traps could include inferring that a product or service is free when there are in fact charges.  Perhaps there are hidden or difficult-to-understand conditions to be met or schemes involving conditional refunds.”

Competition Bureau, Fraud Facts 2017: “Subscription traps, sometimes also referred to as Continuity Scams, can take various forms. They can appear as an advertisement featured on your favourite social media site, a referral from a friend (on Facebook, for example), a fake ‘survey’ that pops up on your computer while you’re online on another website, or from a telemarketer. No matter the form, they will always offer you a ‘free’ trial or purchase of a product, and all you have to do is simply pay the shipping and handling using your credit card. If consumers agree to this, they will find themselves signed up to a subscription service with ongoing fees and unexpected charges. Contacting the company will result in them pointing you towards their online terms and conditions, routinely buried in fine print. Unfortunately, by not returning the ‘free’ product you ordered, you agreed to a monthly subscription of that product and authorized monthly charges on your credit card. Once, you are stuck in this situation, it is often extremely difficult to put a stop to the charges.”

Substantial lessening of competition (SLC) (Canadian competition law market effects test).

The Competition Act contains several competitive effects standards as follows: an adverse effect on competition (sections 75 (refusal to deal) and 76 (price maintenance)) and a substantial lessening of competition (sections 79 (abuse of dominance), 90.1 (the civil agreements provision) and 92 (mergers)).

[Section 92 – mergers]: Competition Bureau, Merger Enforcement Guidelines: “A substantial prevention or lessening of competition results only from mergers that are likely to create, maintain or enhance the ability of the merged entity, unilaterally or in coordination with other firms, to exercise market power.”

Section 93 of the Competition Act sets out a non-exhaustive list of factors that the Competition Tribunal may consider when determining whether a merger prevents or lessens competition substantially (or is likely to).

[Section 90.1 – civil agreements provision]:  Competition Bureau, Competitor Collaboration Guidelines:  “A substantial lessening or prevention of competition results from agreements that are likely to create, maintain or enhance the ability of parties to the agreement to exercise market power.  For example, an agreement can lessen competition where parties to the agreement are able to sustain higher prices than would exist in the absence of the agreement by diminishing existing competition.”

[Section 79 – abuse of dominance]: Competition Bureau, Draft Updated Enforcement Guidelines: The Abuse of Dominance Provisions (2009): “A substantial lessening or prevention of competition is an effect that creates, preserves, or enhances barriers to entry and expansion and, by extension, market power. At this stage, the focus is placed squarely on effects on competition, rather than on the intent or purpose of the practice. In any given case, the degree of market power, the nature and severity of the anti-competitive acts, and the degree of competition remaining in the market will all form part of the determination.  The Bureau analyzes a potential substantial lessening or prevention of competition using a “but for” test: “but for” the practice in question, would there be substantially greater competition in the relevant market in the past, present, or future? If it can be demonstrated that, but for the practice of anti-competitive acts, an effective competitor or group of competitors would likely emerge within a reasonable period of time or would remain in the market to challenge the dominance of the firm(s), the Bureau will conclude that the practice in question results in a substantial lessening or prevention of competition. The Bureau will also examine such factors as whether or not consumer prices might be substantially lower; product quality, innovation, or choice might be substantially greater; or consumer switching between products or suppliers might be substantially more frequent in the absence of the practice.”

Supercartel (cartel/conspiracy law).

American Antitrust Institute, Working Paper, “Is Auto Parts Evolving into a Supercartel?” (November 7, 2013):  “The many auto parts cases seem to be evolving into the world’s second supercartel, like the infamous Vitamins cartels of the 1990s.  Supercartels are unique.  They are: (1) global in scope and (2) have a large number of distinct products (i.e., separate cartels) with partially overlapping corporate membership, and (3) direct their price fixing at customers in one vertical production-distribution channel.  In short, supercartels have wheels within wheels.”

For more information, see: Conspiracy and Conspiracy FAQs.

Supplementary information request / “SIR” (Canadian merger control law). 

Following the amendment of the merger provisions of the Competition Act in 2009, the Competition Bureau now has the power under Canada’s two-stage merger review process to issue “supplementary information requests” or “SIRs” under section 123(1)(b) of the Act for additional relevant information for its review of a merger.  The issuance of a SIR by the Bureau triggers a second 30-day waiting period, which commences once the Bureau has received from each SIR recipient a certified complete response to all information requests set out in the SIR.

See Competition Bureau, Merger Review Process Guidelines.

Supply-side substitutability.

[Abuse of dominance]: International Competition Network, Unilateral Conduct Workbook, Chapter 3: Assessment of Dominance (May, 2011): “Supply-side substitutability refers to switching existing capacity from the production of another product to the production of the allegedly dominant firm’s product or a close substitute in response to an increase in the alleged dominant firm’s prices.”

Sweepstakes (Canadian contest / giveaway law term).

“Sweepstakes” is another term for a promotional contest or giveaway. In Canada, there is no legal distinction between using the terms “contest”, “promotional contest”, “giveaway” or “sweepstakes” to refer to promotional contests where prizes are awarded by way of random draw or skill with a no purchase entry option and, for random draw contests, a skill-testing question. Private parties cannot, however, generally run lotteries in Canada (i.e., where a purchase is required to enter or obtain a ticket or ballot to win a prize), unless a provincial license has been obtained to run a charitable lottery. For more information, see: Canadian Contest Laws. For rules and precedents to run promotional giveaways in Canada (i.e., contests/sweepstakes), see: Canadian Contest Rules and Forms.

Sweepstakes scam (Canadian contest/sweepstakes law).

Canadian Anti-Fraud Centre: “After entering a fake sweepstakes contest in the mail, you will receive a call within two to four weeks from a fraudulent telemarketer. This person will usually identify themselves as a lawyer, judge, customs agent or other official. They will represent themselves as an agent for a particular company. You will be told that you have won a large cash award, but money must be sent up front for taxes, etc.”

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.

Switching costs.

Competition Bureau, Enforcement Guidelines, The Abuse of Dominance Provisions: Sections 78 and 79 of the Competition Act (2012):  “Transaction costs that buyers would have to incur to, among other things, retool, repackage, adapt their marketing, breach a supply contract or learn new procedures, may be sufficient to suggest that switching is an unlikely response to a small but significant and non-transitory price increase.”

OECD, Competition Assessment Toolkit (2011): “the explicit and implicit costs borne by a customer in changing from one supplier to another.  Switching costs may arise for various reasons, including long contract terms or tying of assets to suppliers in a way that makes switching inconvenient, as with tying a phone number to a given service provider.  When consumers face high switching costs, suppliers can charge higher prices for their goods or services.  Suppliers therefore often seek to create high switching costs, sometimes by promoting policies that will ensure high switching costs.”

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