Arlan Gates and Eva Warden1

I Introduction

Abuse of dominance is one of the foundational provisions of Canadian competition law under the Competition Act (Act),2 alongside cartels, mergers, vertical distribution practices and misleading advertising. Originally a criminal provision, abuse of dominance has been an administratively reviewable civil matter since 1986. However, it was significantly strengthened by 2009 amendments that introduced the potential for large administrative monetary penalties (AMPs). Combined with increased enforcement by the Canadian Competition Bureau (Bureau), abuse of dominance has taken on a higher level of practical importance and potential risk for firms active in the Canadian marketplace.

The abuse of dominance provisions are set out in Sections 78 and 79 of the Act. In basic terms, an abuse of dominance in Canada requires a finding by the Canadian Competition Tribunal (Tribunal) that one or more persons who substantially or completely control a class or species of business in Canada have engaged or are engaging in a practice of anticompetitive acts, with the actual or likely effect of substantially lessening or preventing competition in a market. Where an abuse of dominance is established, the Tribunal can prohibit the practice, require another action to be taken or impose AMPs.

The requisite elements of an abuse of dominance have received extensive judicial consideration, and the assessment of whether a firm is dominant and whether the required elements of an abuse have been met is far from straightforward.

To provide guidance in this area, the Bureau has issued Enforcement Guidelines (Guidelines)3 describing its approach to the interpretation of the statutory provisions in light of case law. The Guidelines were issued in September 2012 and explicitly supersede policy statements and several earlier guidelines, including the prior 2001 Guidelines, as well as detailed enforcement guidelines on predatory pricing,4 guidelines specific to the telecommunications and grocery sectors, and draft guidelines specific to the airline industry.5

The Guidelines do not have the force of law and are not binding on the Tribunal, Canadian courts or even the Bureau.6 The Guidelines also emphasise that the Bureau’s enforcement approach will ‘depend on the particular circumstances of each case’, and on the discretion of the Tribunal and Canadian courts in contested cases.7 In practice, abuse of dominance in Canada turns significantly on fact-specific analysis and risk assessment. Firms that are likely to be, or to become, dominant may be subject to a higher level of potential scrutiny and exposure of their business activities if they do not adapt accordingly.

II Year in Review

The Bureau’s evolving and increasingly active approach to enforcement of the abuse of dominance provisions is reflected in a number of recent developments.8

On 1 December 2017, the Federal Court of Appeal upheld the Tribunal’s decision upon the rehearing of a long-running case involving the Toronto Real Estate Board (TREB) that concerned one of the prevailing tests for finding that an abuse of dominance has occurred. The Tribunal had ruled that an abuse of dominance had in fact been established and subsequently issued an order that TREB remove restrictions on its members’ use of certain listing data. The Court of Appeal’s decision is now subject to further appeal by TREB to the Supreme Court of Canada.

Another ongoing case also involves a respondent that technically does not compete directly in the market, the Vancouver Airport Authority (VAA). Despite a procedural setback in January 2018, the Bureau stated that it expects to continue to pursue its abuse of dominance case against the VAA, challenging restrictions that are alleged to decrease competition among in-flight catering companies.

On 17 January 2018, the Bureau entered into a settlement agreement with a software development company in the travel industry, Softvoyage Inc, pursuant to which the company has committed to ending certain restrictive business practices that the Bureau considered to have lessened or prevented competition in markets relating to the supply of ‘all-inclusive travel packages’.

In November 2017, the Bureau announced the discontinuation of its high-profile three-year investigation into the practices of the largest grocery retailer in Canada. Other recently concluded investigations focused on online search and search advertising practices, a smartphone manufacturer’s agreements with Canadian wireless carriers, and the effect of restrictive clauses in contracts between TMX Group Limited and investment dealers on competition in the provision of products delivering consolidated securities market data. These cases and investigations reflect a trend towards an intensified focus on compliance and enforcement since the late 2000s, which in recent years has also included such high-profile developments as the imposition of landmark AMPs in the water heater rental industry.9 Enforcement trends also suggest a focus on the digital economy and, more broadly, innovation. In this regard, the release of updated guidance on the interface of intellectual property (IP) and competition law also underlines the Bureau’s growing attention on the innovative and expanding pharmaceutical industry in particular.

Finally, in March 2018 the Bureau published draft updates to its Guidelines for public comment. Once finalised, the updated guidance will replace the 2012 Guidelines.

i TREB decision

On 1 December 2017, the Federal Court of Appeal upheld a 2016 decision of the Tribunal in favour of the Commissioner against TREB, in a long-running case involving the Canadian real estate industry.10

The Bureau had sought to prohibit restrictions on TREB members’ provision of direct access to multiple listing service (MLS) information such as sales inventory, selling price and broker compensation, arguing that they prevented the introduction of internet-based services such as ‘virtual office websites’ through which such information could be made available at low cost.11 In an unusually short decision in April 2013, the Tribunal had initially determined that the Bureau’s application did not meet the requirements of Section 79(1)(b) of the Act,12 as interpreted in prior case law. The Court of Appeal allowed the Bureau’s appeal in a decision of February 2014, in which it held that the circumstances of the relationship between TREB and its members did not preclude the application of the abuse of dominance provisions of the Act, and referred the matter back to the Tribunal for reconsideration.13

The Tribunal heard the case again throughout the remainder of 2015. In the new proceedings, the Commissioner maintained that the ‘foundations’ of the case remained the same as in 2012, but submitted updated evidence and market developments since the initial hearing.14 On 27 April 2016, the Tribunal ruled in favour of the Commissioner, having determined that the three elements of Section 79 had been established on a balance of probabilities,15 and in June ordered TREB to remove the restrictions on its member agents’ access to the data for display online through virtual office websites.16 Following the Federal Court of Appeal’s dismissal of TREB’s appeal of that decision in December 2017, TREB indicated that it would appeal to the Supreme Court of Canada.17

As discussed in Section IV, Section 79(1)(b) requires that a dominant firm or firms have engaged in ‘a practice of anticompetitive acts’, but in the leading case interpreting this requirement, Canada Pipe,18 the Court of Appeal appeared to hold that the dominant firm must be a competitor of the firm or firms targeted by the practice. In its original decision, the Tribunal found on the facts that TREB does not compete with its members, and therefore could not satisfy this test.19 However, on appeal in 2014, the Court of Appeal held that the abuse of dominance provisions could apply on the basis that TREB controls the market for residential real estate services in the Toronto metropolitan area, even though it is not technically a competitor in that market. More particularly, according to the Court of Appeal in its 2014 TREB decision, Canada Pipe does not mean that ‘a person who does not compete in a particular market can never be found to have committed an anticompetitive act against competitors in that market, or that [an] order can never be made against a person who controls a market other than as a competitor’.20

In its initial decision in 2013, the Tribunal had also disagreed with the Bureau’s argument that certain acts could be seen to have an anticompetitive purpose even if not directed at a specific competitor, as the test in Canada Pipe arguably required. The Court of Appeal in TREB differed, holding that neither Parliament in enacting the provision nor the Court of Appeal in Canada Pipe intended to narrow the scope of Section 79(1) solely to acts targeted against one’s own competitor. The Court of Appeal in Canada Pipe had itself acknowledged that while most of the listed anticompetitive acts that may constitute an abuse of dominance under Section 78 of the Act have in common that they are targeted at one’s own competitor, one of the listed acts is not necessarily one that would be taken against a competitor.21 On this basis, and in the absence of any law specifically foreclosing this possibility, the Court of Appeal in TREB concluded that an abuse of dominance could occur through acts of a non-competitor.

In its subsequent ruling (upon reconsideration) in April 2016, the Tribunal followed the Court of Appeal’s 2014 decision in TREB, stating that TREB was found to substantially or completely control the supply of MLS-based residential real estate brokerage services in the Toronto metropolitan area, owing to its control over the MLS, a key input for competitors in the market. The Tribunal also held that TREB had engaged in (and continued to engage in) a practice of anticompetitive acts for the purpose of Section 79, and that the restrictions imposed by TREB had and would continue to substantially prevent competition in the supply of residential real estate brokerage services.22 This reduction in non-price competition, according to the Tribunal, included ‘a considerable adverse impact on innovation, quality and the range of residential real estate brokerage services that likely would be offered’ in the area absent such restrictions.

While the Tribunal’s latest ruling, and the Court of Appeal’s subsequent dismissal of TREB’s appeal, provide some closure to the TREB matter, the case has raised certain questions regarding the scope of Section 79. For example, the Tribunal’s initial decision had been subject to some criticism that it relied on an artificial distinction between trade associations and their members, since association members who may be responsible for the rules and policies of the association do compete with other members, and with non-members. However, the subsequent decisions of the Court of Appeal and of the Tribunal (upon reconsideration) have created some uncertainty concerning the scope of Section 79(1) and whether its application will be limited to cases involving trade associations and similar bodies, or whether it may have implications for a wider range of parties that are not competitors in the relevant market. An ongoing case involving the VAA, discussed below, suggests the latter.

The TREB case has also renewed debate regarding the role of the Guidelines in interpreting the Act. Arguably, the Guidelines offer some support to the reasoning of the Court of Appeal and Tribunal (upon reconsideration) in TREB in suggesting that at least some acts not directed at competitors may still be considered to have an anticompetitive purpose.23 However, the Court of Appeal’s overt conclusion in its 2014 decision was that the Guidelines ‘provide no useful guidance’ on interpreting Section 79(1) in the case.24 This conclusion is consistent with the high-level, non-binding nature of the Guidelines, which in their current version (released in 2012) are markedly shorter and less instructive than prior guidance, and suggest a desire for enforcement flexibility at the expense of predictability.

While TREB may eventually be seen as a landmark in Canadian abuse of dominance analysis, its unusual facts make it an outlier in its approach to who is considered a competitor, and suggest that further guidance and case law (including, in the near term, the outcome of the VAA case) will be required to understand its full implications as the law continues to evolve.

ii VAA

On 29 September 2016, the Bureau filed a notice of application against the VAA, which is responsible for the management and operation of Vancouver International Airport, including granting physical access to the airport. The case involves restrictions imposed by the VAA that, according to the Bureau, decrease competition at the airport among in-flight catering companies that prepare meals for flight passengers and crew, and also provide related galley-handling services.

Specifically, following an investigation the Bureau concluded that while airlines that operate at the airport want greater choice of suppliers and that there are new suppliers willing to meet this demand, the VAA denies new suppliers access to the airport. The Bureau’s notice of application alleges that the VAA has abused its dominant position ‘by excluding and denying the benefits of competition’ to the in-flight catering marketplace at the airport and has ‘no legitimate explanation to justify the substantial prevention or lessening of competition that has resulted in higher prices, dampened innovation and lower service quality’.25

Similar to TREB, the case against the VAA involves alleged abuse of dominance in a market in which the VAA technically is not a direct competitor. For the purpose of the dominance test, the Bureau’s case is premised on an argument that the VAA substantially or completely controls both the market for airport access for the supply of galley handling and, by extension, the market for the actual supply of galley handling at the airport. In its response to the Bureau’s application, the VAA submitted that it does not itself provide galley handling or have a commercial interest in any entity that provides galley handling at the airport, and that it does not substantially or completely control that market. According to the VAA, moreover, it does not represent entities involved in the provision of such services at the airport and does not have any competitive interest in that market. On this basis, the VAA argues that the case represents an attempt to ‘extend the reach of section 79 well beyond what was articulated’ in the TREB case.

Supplemental submissions made by the VAA in late March 2017, which primarily related to the respondent’s position on ‘litigation privilege’, also indicated that the Bureau has made extensive use of ‘Section 11’ orders (see Section VI) to compel information in this case. In February 2018, the Federal Court of Appeal held that the Bureau can no longer invoke ‘public interest’ privilege on a class-wide basis.26 Following an adjournment in January 2018, hearings on the merits of the case have been delayed, and have since been rescheduled for late 2018.

iii Softvoyage Inc

On 17 January 2018, the Commissioner and Softvoyage Inc (Softvoyage) registered a consent agreement to settle a matter relating to the Bureau’s concerns over Softvoyage’s restrictive trade practices in the travel industry.

The settlement follows a Bureau investigation into alleged abuse of dominance by Softvoyage, which is engaged in the development of software targeted at the travel industry, through certain restrictive trade practices relating to the supply of ‘all-inclusive’ travel packages. According to the Bureau, the company is dominant in two markets relating to supply in this area, namely ‘content management’ (for software used by tour operators to create holiday packages and manage their inventories or ‘content’) and ‘online distribution’ software (which enables the sale of packages to Canadian consumers, either via tour operators or travel agencies). Based on information gathered in the investigation, the Bureau found that the company’s practices created barriers to entry and impacted the level of innovation in the relevant markets. Specifically, it was alleged that after a majority of tour operators adopted Softvoyage’s content management software, the company used exclusivity clauses in its contracts requiring those tour operators to only use Softvoyage’s distribution software. According to the Bureau’s position statement, Softvoyage also prohibited tour operators from ‘extracting or using their own data managed in Softvoyage’s content management software’.27

Under the consent agreement, Softvoyage entered into seven-year commitments to refrain from enforcing restrictive clauses considered likely to limit operators’ choice of distribution software and those likely to limit their ability to use their own content. Softvoyage also committed to collaborate in good faith with tour operators wishing to use competing distribution channels (where their content is managed using Softvoyage’s content management software) and competing content management software (where Softvoyage’s distribution software is used), and to implement a corporate compliance programme.

The case reflects the growing relevance of innovative industries to abuse of dominance considerations in Canada, particularly in the increasingly complex and layered digital economy that ultimately serves various end-consumer needs.28 It also reflects the Bureau’s attentiveness to the possibility that a firm may be able to leverage its market power in multiple markets: not only did Softvoyage allegedly implement exclusivity clauses to create barriers in the market for distribution software,29 but its control over the online distribution software market had ‘facilitated’ its control over the content management software market.30 Finally, it is an example of circumstances where the Bureau gathered information from multiple sources to aid its investigation, in this case including tour operators, travel agencies, industry associations, past and potential competitors, and ‘businesses offering similar products and services in foreign markets’.

iv Loblaw and other recent and ongoing investigations

The Bureau announced in November 2017 the discontinuation of its investigation of Loblaw Companies Limited (Loblaw), a decision it reached following a change in Loblaw’s practices as well as the Bureau’s determination that it had insufficient evidence to proceed.

The investigation targeted the grocery retailer’s pricing strategies and programmes in the context of its relationship with its suppliers,31 reflecting the Bureau’s focus on vertical agreements and arrangements that reference competitors, such as ‘meet-or-release’ and ‘most favoured nation’ clauses.32 The Bureau has alluded to the potential anticompetitive effects of Loblaw’s exercise of market power, and it had been expected that any enforcement action arising from the investigation would have been based primarily on abuse of dominance grounds.

In a position statement, the Bureau indicated that before deciding to close the investigation, it had concluded that Loblaw no longer enforced certain policies (further to an earlier communication by Loblaw to its suppliers that it would cease to do so effective January 2016). The Bureau also determined that, on balance, there was insufficient evidence to conclude that the policies had lessened or prevented competition substantially.33

In the course of the investigation, the Bureau obtained 12 ‘Section 11’ orders (see Section VI) to compel the production of records and other information from major grocery suppliers in December 2014, and reportedly sought another four in October 2016 to further its investigation.

In April 2016, the Bureau announced that it was closing its investigation into alleged anticompetitive conduct in relation to a company’s online search, search advertising and display advertising services in Canada. While the Bureau found evidence to support an allegation that the online search engine and advertiser used anticompetitive clauses in certain types of contracts that negatively affected advertisers with an intent to exclude its competitors, this concern was addressed when the company changed the relevant terms in response to similar concerns raised by the US Federal Trade Commission and through an agreement (in response to the Bureau) not to reintroduce such clauses in Canada. In a position statement regarding the investigation, the Bureau indicated that the complaint-driven inquiry, opened in 2013, involved extensive consultations with industry and economic experts, and interviews with a range of market participants, as well as a Section 11 order compelling the target of the investigation to provide documents and information.34

The online search and advertising investigation reflects the Bureau’s intensifying focus on the digital economy, an area of interest that also prompted, for example, the release by the Bureau of a policy report titled ‘Big data and innovation: key themes for competition policy in Canada’,35 and its stated interest in strengthening cooperative ties with its international counterparts. In addition to consulting with the US Federal Trade Commission and European Commission, the Bureau indicated in its position statement that it would continue to closely follow the international investigations and other developments with respect to the company’s conduct, as well as monitor the digital marketplace more generally.

In January 2017, the Bureau also announced that it was closing its investigation into alleged anticompetitive conduct under the abuse of dominance provisions by a smartphone manufacturer in relation to agreements with wireless carriers for the sale and marketing of smartphones in Canada. The Bureau ultimately concluded that the evidence was insufficient to suggest that the terms ‘resulted in a significant effect on competition’, according to the position statement.36

This latest inquiry is consistent with a number of increasingly prominent themes in the Bureau’s investigative focus and approach. Like the Loblaw investigation, the Bureau considered contractual terms that reference rivals (in this case, other original equipment manufacturers), as well as other restrictive terms imposed in vertical agreements with wireless carriers. Similar to other recent investigations, the smartphone inquiry also featured the use of formal powers to compel the production of information from the subject of the inquiry and third parties (in this case, wireless carriers), as well as communication between the Bureau and its foreign counterparts and monitoring of investigations into similar conduct in other jurisdictions. Moreover, the Bureau indicated its ongoing consideration of innovation and technology in competition matters. In this case, it noted in its position statement that the relevant industry is dynamic and innovative, but also that the fact that there were a number of advancements in smartphone-related technology, and that the entry and exit of various competitors over the course of its investigation ‘does not necessarily preclude a finding that conduct has reduced competition’.

In November 2016, the Commissioner also announced that it was closing its investigation into TMX Group Ltd regarding allegedly restrictive trade practices, including potential abuse of dominance. The Bureau had started the investigation following receipt of a complaint that, through the imposition of restrictive clauses in its contracts with investment dealers, TMX Group was hindering another company’s ability to develop a consolidated securities market data product. The Commissioner’s position statement regarding the inquiry indicates that the investigation focused on the third part of the abuse of dominance test, specifically whether the contractual terms in question were likely to ‘prevent’ competition in a market. Ultimately the Bureau concluded that, based on the available evidence, even absent the contractual agreements between TMX Group and investment dealers, it was unlikely that the complainant would have been able to obtain a sufficient volume of private market data from investment dealers to develop a competitive product.37

v Intellectual Property Enforcement Guidelines

On 31 March 2016, the Bureau released its final updated Intellectual Property Enforcement Guidelines (IPEGs).38 The guidance, which outlines the interface between IP law and competition law in Canada and the Bureau’s approach to dealing with competition issues involving IP, reflects the Bureau’s intensifying focus on pharmaceuticals, with specific commentary on potential abuse of dominance through industry-specific conduct such as ‘product switching’ (or ‘product hopping’) and patent litigation settlements.

The updated IPEGs follow the Bureau’s announcement, in May 2014, that it had ended its investigation of a pharmaceutical company that allegedly held a dominant position in the supply of certain prescription drugs and had allegedly ‘disrupted’ the supply of a drug soon to be off-patent in favour of a successor drug for which there was no generic substitute (i.e., product switching).39 In September 2014, the Bureau also released a white paper discussing patent-related settlement agreements and the potential concerns associated with arrangements such as ‘pay-for-delay’ settlements under various provisions of the Act, including abuse of dominance.40 In clarifying the Bureau’s approach to the interface between IP and competition law, the updated IPEGs crystallise these recent developments towards a sharper focus on potential concerns associated with market power, in the pharmaceutical industry in particular, while setting the stage for the possibility of increased enforcement in that industry going forward.41

More recently, in public statements the Commissioner has continued to emphasise this area in the context of the intersection between IP and competition law.42 This focus dovetails with the Bureau’s stated interest in supporting the development of both competition and innovation.43

vi Update of Enforcement Guidelines on the Abuse of Dominance Provisions

On 14 March 2018, the Bureau announced the publication of draft updates to the Guidelines for public comment. Proposed changes in the Bureau’s revised draft include:

  1. updates to the definition of market power based on recent case law concerning the concept of ‘substantially or completely control’;
  2. revised guidance on the level of market share that generally will or will not prompt further examination, reflecting the Bureau’s current practice;
  3. enhanced guidance on the assessment of certain types of anticompetitive conduct, notably predatory, exclusionary and disciplinary conduct, as well as competitive effects; and
  4. the addition of several hypothetical, illustrative examples.

Subject to the outcome of the public consultation, once finalised, the updated Guidelines will replace the version previously released in 2012.

vii Summary of recent developments

The following table summarises significant recent decisions and developments.

Sector

Investigating authority

Conduct

Case opened

Status

Real estate services

Bureau

Restriction by TREB of members’ access to multiple listing service information (sales inventory, selling price, broker compensation, etc.)

Initial application filed with the Tribunal in May 2011

Rehearing held in 2015. The Tribunal’s April 2016 ruling that abuse of dominance was established (followed by issuance of an order in June) upheld by the Federal Court of Appeal on 1 December 2017, subject to further appeal to the Supreme Court of Canada.

Residential water heaters

Bureau

Alleged ‘aggressive retention tactics’ during customer calls by Reliance Comfort Limited Partnership and Direct Energy Marketing Limited, as well as other policies and procedures aimed at hindering switching to competitors

Initial applications filed with the Tribunal in December 2012

Consent agreement with Reliance Comfort Limited Partnership registered November 2014, including C$5 million penalty and C$500,000 investigation costs.

Consent agreement with Direct Energy Marketing Limited registered October 2015, including a C$1 million penalty and commitment to implement a corporate compliance programme in the event of re-entry into the market.

Commitments by EnerCare Inc not to continue Direct Energy’s alleged anticompetitive policies and practices obtained by the Bureau in November 2014 following the acquisition of Direct Energy by EnerCare.

Pharmaceuticals

Bureau

Alleged ‘product hopping’ by Alcon through intentional disruption of the supply of a branded prescription anti-allergy drug in order to limit or prevent meaningful competition from generic drug companies

Investigation commenced in November 2012

Closure of investigation announced in May 2014 following cessation of the alleged conduct.

Insulin pumps for diabetic patients

Bureau

Imposition of warranty terms relating to use of Medtronic insulin pumps with non-Medtronic equipment, which allegedly limited competition and restricted consumer choice

Date investigation commenced not publicly disclosed but appeared to follow the acquisition by Medtronic Holdings Limited of Covidien plc, which was subject to a consent agreement registered on 26 November 2014

Agreement with Bureau to revise warranty terms announced March 2015.

Digital economy – online search and search advertising

Bureau

Alleged conduct by an online search engine and advertiser intended to exclude or disadvantage competitors, including through imposition of conditions and demands on customers preventing rivals from competing

Investigation commenced in 2013

Subject to ongoing monitoring.

Smartphones

Bureau

Imposition of potentially anticompetitive obligations and restrictions regarding the sale and marketing of smartphones in agreements with Canadian wireless carriers

Investigation commenced after Bureau’s receipt of information on the matter in 2014

Closure of investigation announced in January 2017.

Data aggregation – provision of indicative market data

Bureau

Imposition of contractual clauses in TMX Group’s standard form market data agreement with investment dealers, restricting the latter from sharing private market data with third parties, which according to a complaint to the Bureau hindered a potential competitor’s ability to develop an alternative consolidated data market product

Investigation commenced after the Bureau’s receipt of a complaint in 2015

Closure of investigation announced November 2016.

Galley handling at airports and airport access for the supply of galley handling

Bureau

Conduct by the VAA alleged to decrease competition among in-flight catering companies at Vancouver International Airport

Initial application filed with the Tribunal in September 2016

Hearings expected to take place in 2018.

Software geared towards the travel industry

Bureau

Restrictive practices by Softvoyage Inc in markets related to the supply of ‘all-inclusive travel packages’, specifically through the use of exclusivity clauses in contracts (including contracts with tour operators), giving rise to allegations of foreclosure of the relevant markets or otherwise making access difficult

Date investigation commenced not publicly disclosed

Consent agreement with Softvoyage registered in January 2018, including commitments to cease restrictive practices so as to address Bureau concerns over possible barriers to entry.

The Bureau does not currently publish up-to-date statistics on the number of ongoing abuse of dominance investigations, although it is estimated that currently there are between 20 and 30 ongoing investigations and that the Bureau receives some 400 complaints yearly.

III Market Definition and Market Power

Determining that a firm is dominant is the first of three statutory conditions that must be independently met for the abuse of dominance provisions to apply.

The statutory criteria for dominance are set out in Section 79(1)(a) of the Act, which requires a finding that ‘one or more persons substantially or completely control, throughout Canada or any area thereof, a class or species of business’. Whether this statutory test is met turns on the definition of the relevant market and an assessment of the exercise of market power.

i Market definition

A ‘class or species of business’ and the words ‘Canada or any area thereof’ have been interpreted by the Tribunal to refer to the relevant product and geographical market or markets.44 Market definition focuses conceptually on the existence of substitutes for the product and geographical territory in question. It is usually determined on the basis of a ‘hypothetical monopolist’ test that looks at the smallest market in which a ‘small but significant and non-transitory increase in price’ could be profitably imposed, beginning with the product of the firm in question and the area in which it operates, and expanding the relevant market to include other products or supplier locations likely to be substituted.45

This is generally consistent with the approach taken by the Bureau in defining markets for purposes of merger analysis.46 As in the case of mergers, market definition may depend significantly on the particular features of the product and geographical markets in question. A market need not be conclusively defined to find that a firm or firms exercise market power.47

In addition to considering actual price and supply data where available, the Bureau may take into account a range of other factors in its assessment of market definition, including:

  1. consumer behaviour;
  2. past product or location substitution;
  3. product functional interchangeability;
  4. unique product characteristics;
  5. transportation costs and shipping patterns;
  6. switching costs;
  7. the role of distant sellers and foreign competition; and
  8. past price correlation among substitute products.48
ii Market power

The words ‘substantially or completely control’ in the context of the abuse of dominance provisions have been held by the Tribunal to be synonymous with market power.49 The focus of the Bureau’s concern is the ‘creation, enhancement or preservation of market power’ resulting from a practice of anticompetitive acts. The Bureau’s approach to assessing market power therefore takes into account both pre-existing market power and market power derived from practices alleged to be anticompetitive.50

The Guidelines note that while market power can be measured through direct factors such as high profit margins or ‘supracompetitive pricing’, these factors can present analytical issues and may be inconclusive. The more common analysis will therefore use indirect indicia of market power that suggest the extent to which a firm or firms will be constrained from implementing anticompetitive price increases, either due to existing competition or likely competitive entry. Indirect indicia considered by the Bureau include market shares and barriers to entry, as well as countervailing power from customers or suppliers, and the competitive impact of technological change.

iii Market share

There is no statutory threshold for market share that will necessarily give rise to market power, nor a statutory safe harbour below which a firm will not be considered dominant. However, market share is ‘usually a necessary, but not sufficient’51 condition of finding market power, and will ordinarily be considered together with other factors. Market share may be measured on the basis of revenues, unit sales, sales or production capacity or natural resource reserves, depending on which ‘best reflects the future competitive significance of competitors’.52 In addition to the actual share, the Bureau will consider the distribution of market share among a firm’s competitors, as well as market share fluctuations.

The Bureau has historically taken the position that only a single firm market share below 35 per cent will be considered unlikely to give rise to a finding of market power. The revised (2012) Guidelines maintain this safe harbour, but now go further to say that a market share of up to 50 per cent will ‘generally’ not lead to further examination by the Bureau unless it is believed that the anticompetitive conduct is likely to result in increased market share in a reasonable period. This change is now consistent with the long-standing finding of the Tribunal in the Laidlaw case that a market share below 50 per cent would not lead to a prima facie finding of dominance.53

On the other hand, the Guidelines go further than the Tribunal in stating the corollary that a single firm market share above 50 per cent (or a combined share above 65 per cent, in the case of joint dominance) will ‘generally prompt further examination’. In the Tele-Direct case, the Tribunal held that where market share is 80 per cent or greater, it will look for ‘extenuating circumstances’ and ‘generally, ease of entry’ to outweigh a prima facie finding of market power.54 In practice, contested abuse of dominance cases both before and after Tele-Direct have involved market shares of 80 to 100 per cent, usually in highly concentrated markets.

The Bureau’s draft updates to the Guidelines, published for public comment in March 2018, propose removing the reference to the 35 per cent threshold entirely, and instead referring to the 50 and 65 per cent thresholds.

iv Barriers to entry; other factors

As market share is not determinative of market power, the Bureau will also consider the barriers to entry that may be present in the market, including:

  1. sunk investments (e.g., in equipment, infrastructure or research and development);
  2. government approval requirements;
  3. whether the market is mature or depends on economies of scale or scope;
  4. network effects;
  5. availability of scarce resources or inputs; and
  6. the prevalence of long-term contracts.

Market entry despite barriers to entry must be likely, timely and sufficient to prevent or discourage the exercise of market power.

The Guidelines recognise that, in some instances, customers will constrain market power, for example, through vertical integration or by encouraging entry or expansion of competitors. Markets that undergo rapid technological change or innovation, or some other material form of change, may warrant different consideration if this permits new or existing competitors to overcome the exercise of market power.

v Joint dominance

The words ‘one or more persons’ in Section 79(1)(a) explicitly recognise that two or more firms may have joint dominance. As explained in the Guidelines, the Bureau’s approach to joint dominance is essentially similar to that for single firm dominance except that it is also necessary to find that control of the market is exercised jointly.

For purposes of the criminal conspiracy provisions of the Act, ‘conscious parallelism’, in itself, does not constitute an agreement, and the Bureau adopted this position in the prior (2001) Abuse of Dominance Enforcement Guidelines, which also described factors that could be used to infer joint action in the civil context. The revised Guidelines simply state that ‘[s]imilar or parallel conduct by firms is insufficient’ to establish joint dominance, and offer no further insight into the extent of joint conduct – or maximum level of intra-group competition – required to find joint control of the market. The threshold test for joint dominance has never been considered by the Tribunal as, although the Bureau has commenced three significant joint dominance cases, all have settled prior to a contested hearing.55

In addition to the application of the abuse of dominance provisions to joint dominance, since 2010 it has been possible to address coordinated conduct under Section 90.1, a civil provision that applies to agreements between competitors that substantially lessen or prevent competition.56

vi Attempted monopolisation

In contrast to the US Sherman Act, attempted monopolisation is not caught by the abuse of dominance provisions in Canada. The existence of market power at the time anticompetitive conduct is engaged in is implicit in the formulation of the statutory test, and would prohibit an application to the Tribunal on the basis of anticipated market power. The revised Guidelines nonetheless suggest that the Bureau may investigate the conduct of a firm that does not currently hold market power, but that is expected to acquire it as a result of the allegedly anticompetitive conduct ‘within a reasonable period of time’.57

IV Abuse

i Overview

Dominance itself is not proscribed in Canada. For an abuse of dominance to be found, two other statutory conditions in addition to market power must be met. The first of these requires that the dominant firm or firms have engaged or are engaging in a ‘practice of anticompetitive acts’, as set out in Section 79(1)(b). The second is an effects analysis of whether the practice has had, is having or is likely to have the effect of preventing or substantially lessening competition in a market, as set out in Section 79(1)(c). While apparently similar and often assessed on the basis of the same evidence, these are conceptually distinct tests.

Practice of anticompetitive acts

Although an illustrative list of ‘anticompetitive acts’ is provided in Section 78 of the Act, the list is not exhaustive, and in practice, the abuse of dominance provisions can apply to a wide range of anticompetitive conduct.

Whether an act will be considered ‘anticompetitive’ depends on the limiting principle of whether it has an intended negative effect on a competitor that is ‘predatory, exclusionary or disciplinary’.58 This does not necessarily require subjective intent, and the Tribunal has held that intent can be inferred from the reasonably foreseeable consequences of the conduct or the circumstances in which it is undertaken.59

The requirement that an anticompetitive act be intended to harm a competitor, not competition in general, which is assessed under the separate test in Section 79(1)(c) of the Act, was an essential part of the test in Canada Pipe. The revised Guidelines, however, take the position that ‘certain acts not specifically directed at competitors could still be considered to have an anticompetitive purpose’.60 This broader interpretation – which would encompass ‘facilitating practices’ that do not themselves harm a competitor but permit coordination – was arguably foreclosed by the Tribunal’s initial decision in the TREB case. However, as discussed above, the subsequent decision of the Court of Appeal and the Tribunal’s ruling upon reconsideration leave open the possibility that a range of acts not specifically directed at a competitor (or at least not one’s own competitor) may qualify as ‘anticompetitive acts’ for the purpose of these provisions, an approach that appears also to be reflected in the more recent proceedings against the VAA.

Where anticompetitive intent has been inferred, it is possible to rebut a presumption that the purpose of conduct is anticompetitive by establishing that the conduct had a valid business purpose or justification. In Canada Pipe, it was held that a business justification must have a ‘credible efficiency or pro-competitive rationale’ and be one that ‘relates to and counterbalances the anticompetitive effects or subjective intent of the acts’.61 However, the Guidelines take a broader view that a business justification, while not a defence, could be anything that provides an ‘alternative explanation for the overriding purpose of the conduct’.62

A ‘practice’ of anticompetitive acts under the abuse provisions generally requires more than a single act, but could be met by a single act that has an ongoing or systemic effect or a ‘lasting impact’ in a market.63 A practice may also consist of different forms of anticompetitive conduct,64 not only repeated use of the same conduct, and can therefore in theory include otherwise innocuous conduct, if used in an anticompetitive manner in combination with other anticompetitive practices.

Substantial lessening or prevention of competition

An abuse of dominance will be subject to a remedy under the Act only if there is an actual or likely substantial lessening or prevention of competition.

The prevailing test was formulated in Canada Pipe, and recently affirmed in the context of the evaluation of mergers under the Act.65 It is a ‘but for’ test that seeks to determine if it is likely that there would be substantially greater competition (past, present or future) in the absence of the impugned conduct.66

As was the case prior to Canada Pipe, the test considers whether a practice contributes to the creation, preservation or enhancement of market power, which will be assessed in terms of whether there is substantial effect on market entry or expansion by new or existing competitors. However, in contrast to the test prior to Canada Pipe, it is a comparative, relative assessment, rather than a consideration of whether the absolute level of competition is substantial or sufficient.67 The Guidelines indicate that the Bureau will also consider factors such as whether, but for the practice, there would likely be substantially lower consumer prices, substantially greater product selection, quality or innovation, or substantially more frequent switching.68

In contrast to the test for anticompetitive acts under Section 79(1)(b), the above test concerns competition rather than individual competitors. The Act requires, however, that the analysis take into account whether an impugned practice results from a market participant’s ‘superior competitive performance’, which could be a legitimate cause of a relative decrease in competition.69

ii Exclusionary abuses

The Act enumerates several practices in Section 78 that relate to the exclusion of a competitor, including:

  1. margin squeezing by a vertically integrated supplier;
  2. acquisition by a supplier of a customer;
  3. pre-emption of scarce facilities or resources;
  4. adoption of non-compatible product specifications; and
  5. exclusive dealing.70

The Guidelines also reference tying and bundling, activities that increase customer switching costs or, in general, activities that increase a rival’s costs.71

The Tribunal and Canadian courts have also recognised numerous other exclusivity abuses in case law, including:

  1. meet-or-release and most-favoured nation clauses;72
  2. rights of first refusal;73
  3. automatic price increases;74
  4. long-term contracts;75
  5. negative option automatic renewal provisions;76
  6. costs or penalties, such as liquidated damages or excessive fees to switch suppliers, return goods or otherwise terminate contracts early;77
  7. the acquisition of competitors and inclusion of non-compete clauses in the acquisition agreements;78
  8. various kinds of loyalty or fidelity rebates,79 including discounts and allowances in exchange for the use of the supplier’s logo and name;80
  9. exclusive networks;81
  10. market allocation;82 and
  11. in the real estate services cases, the use of a database in a way that could be exclusionary.83
iii Discrimination

The Act formerly contained per se criminal prohibitions against price discrimination and predatory pricing. When price maintenance was decriminalised with the repeal of those provisions in 2009, it was acknowledged that this conduct would remain subject to review under the abuse of dominance provisions where the conditions of Section 79 were met.84

The Act enumerates several examples of discriminatory or predatory conduct, including freight equalisation, introducing fighting brands selectively and temporarily, buying up product to prevent price erosion, and selling articles below acquisition cost.85 Prior cases have also considered the intimidation of competitors and customers through spurious or threatened litigation,86 cross-subsidisation87 and predatory pricing generally.88

The Guidelines provide that in the context of predatory pricing conduct, the Bureau will assess whether the predatory price is sufficient to cover the average avoidable (i.e., variable) costs of providing a good or service, taking into account whether competitors could match the price without incurring a loss, and whether an allegedly predatory price is being offered to meet competition.

iv Exploitative abuses

The Act does not prohibit excessive pricing or similar exploitative abuses, except to the extent that they have an exclusionary, disciplinary or predatory purpose and likely effect. The revised Guidelines explicitly state that higher prices or lower levels of service than would be expected in a market characterised by greater competition will not, in themselves, constitute an abuse of dominance.89

V Remedies and Sanctions

i Sanctions

Since 2009, the Tribunal has had the discretion, in addition to ordering behavioural or structural remedies, to impose AMPs of up to C$10 million in the first instance or C$15 million for a ‘subsequent order’.90

Pursuant to the Act, the Tribunal is required to consider various factors in determining the amount of an AMP, including the affected sales, actual or anticipated profits, the dominant firm’s financial position, its history of compliance and ‘any other relevant factor’.91 An unpaid AMP is a debt owed to the Crown and recoverable in any court of competent jurisdiction.

Although the stated purpose of AMPs in the Act is compliance and not punishment,92 the constitutionality of AMPs has been challenged in other contexts on the basis that they are punitive and therefore warrant the same procedural protections as criminal penalties.93 To date, the Reliance and Direct Energy cases discussed in Section II are the only cases in which AMPs have been sought by the Bureau and ultimately imposed.94

ii Behavioural remedies

The most basic remedy under Section 79 is an order prohibiting the continuation of a practice of anticompetitive acts. In addition or as an alternative, the Tribunal has broad discretion to make any other order required to restore competition, where a prohibition order alone is not likely to be sufficient to restore competition in the market.95 Both consent agreements and prohibition orders can theoretically be imposed for an indefinite period.96

An interim order may be issued, on application by the Bureau on an ex parte basis, where the Tribunal finds that injury to competition cannot be adequately remedied by a later order, or in certain other specific circumstances, is likely to occur in the absence of the order.97

iii Structural remedies

The Tribunal’s authority to make a restorative order explicitly extends to an order to divest assets or shares, if reasonable and necessary to overcome an abuse of dominance, although to date divestiture has never been ordered under Section 79.

VI Procedure

The Monopolistic Practices Directorate of the Bureau’s Mergers and Monopolistic Practices Branch investigates potentially anticompetitive business practices, such as abuse of dominance and restrictive vertical trade practices, as well as certain types of anticompetitive agreements or arrangements.98

Obtaining an order for a remedy under the abuse of dominance provisions in principle requires an application by the Commissioner of Competition to the Tribunal, a specialised competition court with judicial and lay members that hears and decides non-criminal matters under the Act.99 Cases before the Tribunal are subject to rules of procedural practice, which, inter alia, provide for documentary, written and oral discovery on a relevance standard.100 Decisions of the Tribunal may be appealed to the Federal Court of Appeal, and ultimately to the Supreme Court of Canada. Courts may refer matters back to the Tribunal for redetermination.

However, it is increasingly common for alleged abuses of dominance to be investigated and initially challenged outside the formal Tribunal process with a view to seeking a negotiated resolution. Negotiated settlements are then recorded in a ‘consent agreement’, which is registered with the Tribunal and, once registered, carries the legal force of an order of the Tribunal.101 Firms that volunteer to make changes in their businesses practices are generally required to formalise these commitments in a consent agreement.102

Consent agreements must be ‘based on terms that could be the subject of an order of the Tribunal’, but consent agreements filed with the Tribunal are not subject to its substantive oversight; nor are full details of the conduct leading to the agreement made public. Given the availability of consent agreements, abuse of dominance investigations often settle before reaching the contested hearing stage. On the other hand, this framework has been observed to be one in which respondents may ‘“dig in”, or at least protract settlement discussions, to avoid a restrictive consent agreement’.103

The Act provides the Bureau with numerous tools to investigate alleged abuses of dominance, including the ability to obtain a judicial order under Section 11 of the Act to compel oral examination, document production or a written response to questions, where the Bureau believes grounds may exist for an order. The Bureau has increasingly made use of this tool to compel production in recent activity such as the Loblaw investigation. The Bureau can also obtain a warrant to enter and search premises and seize documents, or, in ‘exigent’ circumstances, exercise these rights without a warrant.104 Section 11 orders can extend to affiliates outside Canada of a Canadian corporation that is subject to the order, and can also be used to obtain information from third-party customers, suppliers and competitors.

Various procedural limitations are set forth in statute. Applications for remedies must be brought to the Tribunal no later than three years after a practice has ceased.105 The Commissioner may not bring an application under both the abuse of dominance provisions and either the criminal conspiracy provisions or the civil price maintenance, competitor collaboration or substantive merger provisions.106 However, the Bureau may, and often does, bring applications under both the abuse of dominance provisions and provisions relating to other vertical trade practices, as discussed in Section VII.

VII Private Enforcement

There is no private right of action to obtain remedies for abuse of dominance in Canada. Only the Commissioner may bring applications or register consent agreements with the Tribunal.

There is also no statutory right to obtain damages as a result of a finding of an abuse of dominance, although under Section 36 of the Act a private right of action is available where an order of the Tribunal has been violated.107

Attempts by private litigants to bring cases on the basis of civil conspiracy or torts alleging an abuse of dominant position have not been recognised for the reason that, unlike the criminal provisions, the civil provisions of the Act are presumptively lawful unless and until an order has been granted by the Tribunal.108

However, Section 103.1 of the Act does allow private parties to apply for leave to bring applications before the Tribunal under the refusal to deal (Section 75), price maintenance (Section 76), and exclusive dealing, tied selling and market restriction (Section 77) provisions of the Act, where the underlying requirements of those sections are met. While the remedies available under those provisions do not include AMPs or damages, and while actions are costly to bring, private litigants could in theory use Section 103.1 to prohibit certain conduct that might otherwise be pursued as an abuse of dominance, or to draw attention to related abuse of dominance concerns, providing private parties with a ‘back door’ method of privately challenging abuse of dominance.109

Private parties are also entitled to file a complaint with the Bureau with regard to the abuse of dominance provisions. Consumer and competitor complaints are a primary source of leads for Bureau investigations.

VIII Future Developments

It is likely that considerable attention will continue to be focused on abuse of dominance in Canada in the coming year, with the following expected developments being of particular relevance:

  1. finalisation of the updated Abuse of Dominance Guidelines following public consultation;
  2. commencement of an appeal by TREB to the Supreme Court of Canada following the Federal Court of Appeal’s upholding of the Tribunal’s 2016 ruling;
  3. the continuation of the Bureau’s proceedings against the VAA;
  4. a continued focus on agreements that reference rivals in general in light of the recently discontinued investigation into Loblaw’s pricing strategies and similar considerations in a recent investigation in the market for smartphones;
  5. increased focus on the digital economy as well as innovative markets generally as they relate to dominance, further to recent enforcement trends, the Bureau’s stated commitment in its 2017–2018 Annual Plan to ‘creating the conditions for innovation’, and a policy report on ‘big data and innovation’ released in February 2018; and
  6. continued attention on the pharmaceutical industry in particular, following the release of the updated IPEGs and in light of a growing number of pharmaceutical transactions subject to merger review under the Act.

1 Arlan Gates is a partner and Eva Warden is an associate at Baker McKenzie LLP. The authors thank Yana Ermak, a senior associate at Baker McKenzie LLP, for valuable contributions to the 2018 update of this chapter.

4 The former predatory pricing guidelines also addressed the Bureau’s approach to predatory pricing under Section 50 of the Act, which was repealed in 2009 together with the Act’s former criminal prohibition against price discrimination.

5 Competition Bureau, Enforcement Guidelines on the Abuse of Dominance Provisions (Sections 78 and 79 of the Competition Act) (July 2001); Predatory Pricing Enforcement Guidelines (July 2008); Information Bulletin on the Abuse of Dominance Provisions as Applied to the Telecommunications Industry (June 2008); the Abuse of Dominance Provisions (Sections 78 and 79 of the Competition Act) as Applied to the Grocery Sector (November 2002); and Draft Enforcement Guidelines on Abuse of Dominance in the Airline Industry (February 2001).

6 A binding written opinion on the applicability of Section 79 may be requested from the Bureau for a fee pursuant to Section 124.1 of the Act, but in practice this is infrequently used.

7 Guidelines, Preface.

8 The Bureau does not currently publish up-to-date statistics on the number of abuse of dominance investigations commenced or discontinued. While several prominent cases were decided in the first two decades after 1986, more than one-third of all cases ever to come before the Tribunal for decision or registration of a consent agreement have been since 2009.

9 The Commissioner of Competition v. Reliance Comfort Limited Partnership, CT-2012-002: http://www.ct-tc.gc.ca/CasesAffaires/CasesDetails-eng.asp?CaseID=355; The Commissioner of Competition v. Direct Energy Marketing Limited, CT-2012-003: http://www.ct-tc.gc.ca/CasesAffaires/CasesDetails-eng.asp?CaseID=356.

10 Toronto Real Estate Board v. Commissioner of Competition, 2017 FCA 236. The TREB case followed an earlier, successful challenge against the Canadian Real Estate Association (CREA) arising from allegations that CREA and its members had used their control of the MLS and related trademarks to impose exclusionary restrictions that inhibited or prevented fee-for-service, flat-fee and other ‘reduced service’ models from effectively competing in the residential real estate services market. The CREA case was resolved by way of a consent agreement filed with the Tribunal in 2010 that prohibits CREA from adopting, maintaining or enforcing discriminatory rules for a period of 10 years (The Commissioner of Competition v. The Canadian Real Estate Association, Consent Agreement, CT-2010-002: www.ct-tc.gc.ca/CasesAffaires/CasesDetails-eng.asp?CaseID=325).

11 Real estate boards and associations in other Canadian jurisdictions and the United States typically allow their members access to, and use of, their MLS information to provide internet-based services.

12 The Tribunal determined that based on its finding under Section 79(1)(b), the application would necessarily also fail the other statutory tests under Sections 79(1)(a) and 79(1)(c). The Tribunal noted in obiter that a case could potentially be brought instead under the civil horizontal agreement provisions in Section 90.1 of the Act.

13 2014 FCA 29. On 24 July 2014, the Supreme Court of Canada denied TREB’s application for leave to appeal the Court of Appeal’s decision.

14 See Closing Arguments of the Commissioner of Competition (12 November 2015). Among other updates, the Commissioner’s case in 2015 included evidence that TREB continued to actively enforce prohibitions on members’ sharing of historical MLS data, and that already high real estate prices in the Greater Toronto Area had continued to rise since 2012.

17 2017 FCA 236.

18 Canada (Commissioner of Competition) v. Canada Pipe Co, 2006 FCA 233 (Federal Court of Appeal). As leave to appeal the Court of Appeal’s decision to the Supreme Court of Canada was denied, the Court of Appeal decision is a binding precedent.

19 In the initial decision, the Tribunal pointed in part to the Court of Appeal’s observation in Canada Pipe that eight of the nine examples of anticompetitive acts enumerated in Section 78 of the Act describe harms against competitors, and harm to a competitor could be implied in the ninth example. It also noted that a proviso in Section 79(4) implies that the dominant firm must compete in the market. These provisions are further discussed in Section IV.

20 At paragraph 14. While the Tribunal in its original decision held that its finding with respect to Section 79(1)(b) (based on the fact that TREB does not compete with its members) alone was ‘fatal’ to the application, the Court of Appeal’s decision first considered Section 79(1)(a), which requires that one or more persons substantially or completely control a class or species of business.

21 At paragraph 19. Specifically, Section 78(1)(f) refers to ‘buying up of products to prevent the erosion of existing price levels’, which the Court of Appeal in Canada Pipe noted need not be conduct directed against a competitor.

22 Among other considerations, the Tribunal in its April 2016 decision found that the restrictions substantially reduced the degree of non-price competition in the supply of MLS-based residential real estate brokerage services, relative to the degree that otherwise would likely exist.

23 Guidelines, Section 3.2.

24 At paragraph 21. According to the Court of Appeal, the Guidelines ‘indicate at most that the understanding of the scope of subsection 79(1) has changed over time’. The earlier decision of the Tribunal had noted that the Guidelines seem to reflect that the Commissioner ‘is not happy with the decision in Canada Pipe to the extent that it limits anticompetitive acts to those intended to harm a competitor’ (at paragraph 19), but that in any event they do ‘not clearly state that the dominant party need not compete in the market’.

25 The Commissioner of Competition v. Vancouver Airport Authority, Notice of Application, CT-2016-015: www.ct-tc.gc.ca/CasesAffaires/CasesDetails-eng.asp?CaseID=404.

26 2018 FCA 24. The decision marks a significant shift from long-running practice relating to privilege. Whereas the Bureau previously had been able to assert public interest privilege on a class-wide basis, going forward it will only be able to invoke privilege on a document-by-document basis. The Bureau has indicated that it will not appeal the Court of Appeal’s decision, but intends to continue to pursue its case against the VAA despite the decision.

28 The Bureau has commented, in its position statement, that while both of the relevant markets in this case (software for content management and distribution of holiday packages) may seem ‘ancillary’ to the end consumer, such software is ‘very important to the variety of product offerings that are ultimately made available to consumers’, particularly as ‘enhanced innovation on the software side translates into a more personalised experience that will better serve the consumer’s particular interests, preferences or needs’.

29 According to the Bureau’s position statement, the restrictive clauses ‘had the effect of creating an artificial link between Softvoyage’s content management software and its distribution software by rendering the tour operators’ content inaccessible to any of Softvoyage’s competitors in the market for distribution software’.

30 That is, because the ‘optimal distribution’ available through Softvoyage’s distribution software had helped to prompt tour operators to migrate towards the company’s content management software.

32 In the case of the Loblaw investigation, the Bureau has indicated that it considered in particular Loblaw’s programmes and policies with suppliers that reference rivals’ prices.

39 An application by the Bureau for an ex parte order to compel document production and written responses was filed with the Federal Court on 13 December 2012. According to the Bureau, the firm had ceased the conduct that raised concerns shortly after the Bureau began its investigation, causing competitive market dynamics to be restored.

44 Canada (Director of Investigation and Research, Competition Act) v. NutraSweet Co (1990), 32 CPR (3d) 1 at 9 and 20.

45 The benchmark for ‘significant’ and ‘non-transitory’ is a 5 per cent increase in price, sustained over a one-year period. The relevant price is that which would exist in the absence of the anticompetitive acts (often not the current price). The ‘price’ can include not only the nominal price, but also qualitative factors such as product quality, choice, service, support or innovation.

47 One distinction between the two approaches is the Bureau’s acknowledgment, in the abuse of dominance analysis, of a potential ‘overly broad product market definition’ if current prices – that is, price levels where market power has already been exercised – are taken into account (the ‘cellophane fallacy’). See Guidelines, Section 2.1.

48 Guidelines, Sections 2.1 and 2.2.

49 NutraSweet at 28.

50 Market power is most often associated with sellers that possess the ability to maintain prices or impose restrictions on non-price aspects of competition without effective discipline from competitors in the market, but can also arise among a buyer or buyers that exercise market power in lowering the price paid to a seller below a competitive level.

51 Guidelines, Section 2,3,1,

52 Guidelines, Section 2.3.1.

53 Canada (Director of Investigation and Research) v. Laidlaw Waste Systems Ltd (1992), 40 CPR (3d) 289.

54 Canada (Director of Investigation and Research) v. Tele-Direct (Publications) Inc (1997), 73 CPR (3d) 1. Separately, in a case involving a sole supplier, the Tribunal presumed market power in the absence of ‘evidence that there [were] no barriers to entry’; Director of Investigation and Research v. D&B Companies of Canada Ltd (1995), 64 CPR (3d) 216.

55 Canada (Director of Investigation & Research) v. Bank of Montreal (1996), 68 CPR (3d) 527; Canada (Director of Investigation & Research) v. AGT Directory Ltd [1994] CCTD No. 24; Canada (Commissioner of Competition) v. Waste Services (CA) Inc and Waste Management of Canada Corporation, Consent Agreement, CT-2009-003. However, in the 2009 Waste Services case, the Bureau’s allegations against two commercial waste firms appear to have been based on parallel conduct combined with high combined market share of greater than 80 per cent. The firms in question both used long-term contracts that imposed highly restrictive terms on customers, such as automatic renewal clauses and severe penalties for early termination; the Bureau did not suggest that the challenged conduct involved any coordination or agreement.

56 Some commentators foresee a complementary role for the provisions, with Section 79 targeting conduct that reduces competition outside the oligopoly, and Section 90.1 targeting competition between the oligopoly members. See M Aitken and E Davis, ‘The Changing Regulation of Canadian Oligopolies: Complementary Enforcement Roles for Section 90.1 and Joint Dominance’, Conference Paper, American Bar Association Section of Antitrust Law Spring Meeting, 12 April 2013. Moreover, as noted in Section II, following the Bureau’s restructuring, the responsibilities of the ‘Monopolistic Practices Directorate’ cover both abuse of dominance and certain types of anticompetitive agreements or arrangements.

57 Guidelines, Section 2.3.

58 Canada Pipe at paragraph 66.

59 NutraSweet at 35.

60 Guidelines, Section 3.2.

61 Canada Pipe at paragraph 73.

62 Guidelines, Section 3.2.

63 Guidelines, Section 3.1.

64 NutraSweet at 59.

65 Tervita Corporation v. Canada (Commissioner of Competition), 2015 SCC 3. In its decision of 22 January
2015, the Supreme Court of Canada considered whether, but for the merger, the acquired party would likely have entered the relevant market as a competitor.

66 The Court of Appeal held that the Tribunal had erred in considering whether there continued to be a substantial level of competition in the market.

67 Guidelines, Section 4.

68 Confusion around the application of the test following the Canada Pipe decision has, however, arguably led to imperfect application of the principle of relative competitiveness in practice.

69 Act, Section 79(4).

70 Sections 78(a), (b), (e), (j), and (h).

71 Guidelines, Section 3.2.1.

72 NutraSweet; D&B regarding most favoured nation clauses.

73 Laidlaw.

74 Id.

75 D&B.

76 Laidlaw.

77 Direct Energy and Reliance; Laidlaw; D&B; Waste Services.

78 Canada Pipe; Laidlaw.

79 Canada Pipe; NutraSweet.

80 NutraSweet.

81 Bank of Montreal.

82 AGT regarding allocation of national advertisers.

83 CREA; TREB.

85 Sections 78(c), (d), (f), and (i).

86 Laidlaw.

87 NutraSweet; Tele-Direct.

88 Commissioner of Competition v. Air Canada, 2003 Comp Trib 13; Tele-Direct.

89 Guidelines, Section 1.

90 AMPs had previously been available in the domestic airline industry only.

91 Act, Section 79(3.2).

92 Act, Section 79(3.3).

93 Constitutional arguments challenging AMPs under the civil misleading advertising provisions of the Act, for which the same level of AMPs is available as for abuse of dominance, were made but effectively rejected in Canada (Competition Bureau) v. Chatr Wireless Inc, 2013 ONSC 5315 (Ont. Sup. Ct.): http://canlii.ca/t/g04cv.

94 As explained in Section II, Reliance was not a fully contested case. The C$5 million penalty obtained by the Bureau was the result of a consent agreement.

95 Act, Section 79(2).

96 In contrast, criminal prohibition orders and orders regarding civil deceptive marketing practices are subject to a statutory maximum limitation period of 10 years.

97 Act, Section 103.3. Interim orders are issued for an initial term of 10 days but may be extended up to twice for 35 days each.

99 See www.ct-tc.gc.ca.

100 Competition Tribunal Rules, SOR/2008-141: http://laws-lois.justice.gc.ca/eng/regulations/SOR-2008-141.

101 Act, Section 105.

102 Guidelines, Section 1.

103 G Addy, J Bodrug and C Tingley, ‘Abuse of Dominance in Canada: Reflections on 25 Years of Section 79 Enforcement’, Canadian Competition Law Review, Vol. 25, No. 2 (2012), at 308.

104 Act, Section 15.

105 Act, Section 79(6).

106 Act, Sections 45 or 49, 76, 90.1 or 92 respectively.

107 Section 36 of the Act applies to breaches of the criminal provisions of the Act; a breach of an order of the Tribunal is a criminal offence.

108 For example, Chadha v. Bayer Inc (1998), 82 CPR (3d) 202 (Ont. Gen. Div.). However, in an action against TREB, CREA and their directors and officers alleging in part that they had breached the terms of CREA’s consent agreement, the Court of Appeal in refusing a motion to strike the statement of claim found that a reasonable cause of action was disclosed (Dale v. Toronto Real Estate Board, 2012 ONSC 512).

109 In several past refusal to deal leave applications, the plaintiffs alleged (or implied) that the defendant suppliers were dominant. See for example Barcode Systems Inc v. Symbol Technologies Canada ULC, Allan Morgan and Sons Ltd v. La-Z-Boy, Mrs O’s Pharmacy v. Pfizer, Paradise Pharmacy Inc v. Novartis and Broadview Pharmacy v. Wyeth, Nadeau Ferme Avicole Limitee/Nadeau Poultry Farm Limited v. Groupe Westco Inc and Groupe Dynaco, Cooperative Agroalimentaire and Volailles Acadia SEC and Volailles Acadia Inc/Acadia Poultry Inc, Canadian Standard Travel Agent Registry v. International Air Transport Association, and Swenson Inc v. Trader Corporation.