Provisional comments on abuse of dominance

  • February 27, 2024

The Competition Law and Foreign Investment Review Section of the Canadian Bar Association, in a submission, offers provisional commentary on the Draft Bulletin on Amendments to the Abuse of Dominance Provisions in the Competition Act. Parliament made significant amendments to the abuse of dominance provisions in Bill C-56, the Affordable Housing and Groceries Act, which were adopted after the Draft Bulletin was released. Further amendments are anticipated once Parliament adopts Bill C-59, the Fall Economic Statement Implementation Act, 2023. The Section expects the Competition Bureau to consult on further revisions to the Draft Bulletin.

Consultations are especially important for abuse of dominance, the Section says, “given the difficulty in distinguishing between aggressive, but pro-competitive conduct, and conduct that may be anti-competitive. In particular, detailed examples in the Draft Bulletin are useful for Canadian businesses.”

The 2022 budget implementation legislation expanded abuse of dominance provisions to include conduct that is intended to harm competition, not just competitors. There are four kinds: agreements between competitors, information sharing, contracts referencing rivals and serial acquisitions (and stand-alone acquisitions).

On agreements between competitors, the Section singles out paragraph 23 of the Draft Bulletin, which says any such agreement giving rise to a criminal offence under s. 45 of the Competition Act would be referred for prosecution instead of being dealt with via an application under the abuse of dominance provisions at s. 90.1. This “unnecessarily limits the Commissioner of Competition’s enforcement discretion with respect to agreements that may violate section 45,” the submission reads, adding that such rigid language also contrasts with the Competitor Collaboration Guideline 3. The latter states that the Bureau will “determine, based on evidence in its possession or to be gathered, whether the criminal provision in section 45 or the civil agreements provision in section 90.1 is applicable.” The Draft Bulletin should include language similar to that of Guideline 3.

On information sharing the Draft Bulletin suggests that it can be considered an abuse of dominance when coupled with certain facilitating practices, which the Section says is a new approach under Canadian law that requires more elaboration and consideration. The submission recommends “that the Draft Bulletin state that the facilitating practice (such as intentional sharing of competitively sensitive information) is the anti-competitive act, not any conscious parallelism that may exist after a facilitating practice is undertaken by jointly dominant firms.”

On contracts that reference rivals the CBA Section notes the example given in the Draft Bulletin of a dominant retailer matching competitors’ lower prices, including through the use of a dynamic pricing algorithm, suggests that a pricing policy that benefits consumers may be viewed as anti-competitive, on the theory that it might disincentivize competitors to reduce prices. “The example implies that the Bureau’s position is that dominant retailers should deliberately keep prices above competitive levels to avoid engaging in an anti-competitive act, or that price matching in general could be anti-competitive (rather than pro-competitive, as is usually understood).” This example should be removed or clarified.

On serial acquisitions, the Draft Bulletin should clarify that merger review continues to be the primary method of addressing concerns related to an individual transaction. “While there can be scope to address serial acquisitions as an abuse of dominance in certain circumstances, this would only apply to a narrow category of transactions,” the CBA Section writes. The Bureau should also give further guidance on its approach to identifying when serial acquisitions constitute abusive conduct.

Joint conduct

The CBA Section has previously offered comprehensive commentary on the need for a coherent and principled approach to joint dominance, including that an approach that’s too expansive would risk “chilling legitimate and pro-competitive or competitively neutral behaviour.”

The submission recommends clarifying the Draft Bulletin to say that “mere conscious parallelism, without something more – such as communication or coordination between firms – would not in itself constitute an anti-competitive act or a joint abuse of dominance.”