Competition Bureau Issues Draft Enforcement Guidelines on the Abuse of Dominance Provisions of the Competition Act

On March 22, 2012 the Competition Bureau (Bureau) issued its revised draft Abuse of Dominance Guidelines (the Revised Guidelines) for comments. The Revised Guidelines supersede a previous draft issued for consultation in early 2009, and propose to replace a number of Bureau publications on abuse of dominance which currently provide guidance to specific business sectors. In contrast to these previous publications, the Revised Guidelines are more concise and less informative, therefore creating uncertainty for businesses operating in Canada.

In addition to taking a broad and less transparent approach to the application of the abuse of dominance provisions of the Competion Act (Act), the Revised Guidelines raise certain issues and differ significantly in tone and substance from the 2009 draft. For instance, the Revised Guidelines still state that a market share of less than 35% will generally not prompt further examination by the Bureau, and note that a market share between 35% and 50% will not give rise to a "presumption of dominance." However the Revised Guidelines now provide that in addition to an individual firm’s market share, the Bureau will examine the distribution of the remaining market shares among competitors, given that the disparity between a firm’s market shares and those of its competitors can increase a firm’s ability to exercise market power. Accordingly, the Bureau will also consider the durability of a firm’s market share and assess whether shares have fluctuated significantly among competitors over time. While additional information on the Bureau’s general approach to market shares of less than 50% is welcomed, the Revised Guidelines provide very limited guidance on how the Bureau will assess allegations of abuse of dominance, besides stating that it will conduct its investigations on a case-by-case basis.

With respect to joint dominance, the Revised Guidelines state that where a group of firms is alleged to be jointly dominant, a combined market share of 65% or more will generally prompt further examination by the Bureau. The Revised Guidelines also note that the Bureau will determine whether firms are jointly dominant by identifying the firms in the market that would need to jointly control a relevant product market such that they hold market power together. This statement constitutes a significant departure from the Bureau’s position described in the previous draft, which stated that, in joint dominance cases, each firm needed to engage in potentially anti-competitive behaviour and, together, appear to hold market power.

The Revised Guidelines also include an updated discussion on anti-competitive acts and note that in Canada Pipe, the Federal Court of Appeal (FCA) stated that an anti–competitive act is defined in relation to its purpose (i.e., an intended negative effect on a competitor), but that paragraph 78 (1)(f) of the Act, which deals with buying up of products to prevent the erosion of existing price levels, provides for one exception to this requirement, as it does not contain an explicit reference to a purpose directed at a competitor. The Revised Guidelines then state that while many types of anti-competitive conduct may be intended to harm competitors, the Bureau considers that certain acts not specifically directed at competitors could still be considered to have an anti-competitive purpose. This statement suggests that the Bureau could attempt to extend the FCA’s interpretation with respect to paragraph 78 (1)(f) to other anti-competitive acts.

Unfortunately, and in contrast to the previous draft, the Revised Guidelines do not provide details with respect to the Bureau’s approach to certain specific anti-competitive acts, including raising rivals’ costs, exclusive dealing, tying, bundling, bundled rebates and denial of access to a facility or service; therefore providing less guidance to businesses on the Bureau’s approach to the enforcement of the abuse of dominance provisions of the Act.

Finally, in 2009, the abuse of dominance provisions were amended to provide for administrative monetary penalties (AMP) of up to $15 million. The Revised Guidelines provide very limited details with respect to the Bureau’s approach to remedies, and no insight as to the circumstances in which the Bureau will seek an AMP.

Further consultation on the Revised Guidelines may resolve some of the issues described above. As such, interested parties may provide comments to the Bureau on the Revised Guidelines until May 22, 2012.