CANADIAN COMPETITION LAW
Carolyn N. Naiman and Chad M. Leddy
Blake, Cassels & Graydon LLP
1
February 2, 2009
CANADIAN COMPETITION LAW
Introduction
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•
Why competition law should matter to EPR stakeholders:
–
All businesses operating in Canada must avoid
anti-competitive actions in the normal course of operations
–
When competitors collaborate the legal risks increase
•
My overall objective today:
–
Is not to specify which EPR program design is best
–
Is to point out some of the competition law risks
associated with EPR solutions to waste problems
PRESENTATION OUTLINE
1. Efficiency and Competition
2. The Competition Act
3. Competition Law Risks for EPR
Stakeholders
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CANADIAN COMPETITION LAW
Part 1: Efficiency and Competition
• Efficient Competition
• Inefficient Competition – Externalities
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EFFICIENCY AND COMPETITION
What is Efficiency?
• One of the Competition Act’s stated
purposes is to promote an efficient
Canadian economy
• Efficiency refers to the level of
“societal well being” generated by
given state of affairs
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EFFICIENCY AND COMPETITION
Types of Efficiency
• Allocative Efficiency
• Productive Efficiency
• Dynamic Efficiency
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EFFICIENCY AND COMPETITION
Competition and Efficiency
• Competition is the vehicle that assists in
arriving at the most efficient outcome possible
• Perfect competition should result in a
perfectly efficient outcome
• An efficient outcome occurs when the marginal
cost of producing a product equals its price
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EFFICIENCY AND COMPETITION
Perfect Competition
• What would a perfectly competitive
market look like?
• Perfect competition is a paradigm that can show
us the theoretical limits, but does not really exist
in any but a very small handful of markets
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EFFICIENCY AND COMPETITION
Market Failures
• Various types of market failures
mean that no market is perfectly
competitive
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EFFICIENCY AND COMPETITION
Negative Externalities
• If the social costs of production
exceed the private costs, then overall
social welfare may be reduced
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EFFICIENCY AND COMPETITION
EPR and Externalities
• How can negative externalities be
reduced or eliminated?
– “Internalize externalities”
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CANADIAN COMPETITION LAW
Part 2: The Competition Act
•
•
•
•
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What is the Competition Act?
Why the Competition Act matters
The WDA and regulated conduct
Relevant Competition Act provisions
THE COMPETITION ACT
Basic framework of the Canadian
competition law system
•
•
•
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The Rules
The Players
The Referees
THE COMPETITION ACT
The Rules: The Competition Act
What the Act is:
• Federal legislation effective across Canada
• Reflects the belief that competitive markets operate
most effectively and provide consumers with lowest
prices and maximum product choices
What the Act is not:
• Not a limitation on aggressive, hard hitting competition
on the merits
• Designed to protect competition, not individual
14 competitors
THE COMPETITION ACT
The Rules: The Competition Act
• The Act’s purpose (as set out at s.1.1) is to maintain
and encourage competition in Canada in order to:
– promote the efficiency and adaptability of the Canadian
economy;
– expand opportunities for Canadian participation in world markets
while at the same time recognizing the role of foreign
competition in Canada;
– ensure that small and medium-sized enterprises have an
equitable opportunity to participate in the Canadian economy;
and
– provide consumers with competitive prices and product choices.
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THE COMPETITION ACT
The Rules: The Competition Act
• The Act addresses three main threats to
competition:
– Agreements between firms to affect
prices/competition
•
•
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Unilateral conduct (by a single firm) that is
anti-competitive, including Abuse of
Dominance, Predatory Pricing, and Resale
Price Maintenance
Mergers that would result in a substantial
lessening of prevention of competition
THE COMPETITION ACT
The Rules: The Competition Act
• The Act regulates competition in three ways:
– Establishes serious criminal offences
(e.g.: price fixing agreements between competitors)
– Establishes a range of non-criminal reviewable trade
practices, which may be subject to remedial order
(e.g.: abuse of a dominant position)
– Allows for private actions in limited circumstances,
allowing a private party to recover damages suffered
as a result of a breach of the criminal provisions or to
apply for an injunctive order in the case of several
civil provisions.
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THE COMPETITION ACT
The Players: The Competition Bureau
•
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The Competition Bureau is an
independent law enforcement agency,
headed by the Commissioner of
Competition
THE COMPETITION ACT
The Players: The Competition Bureau
•
•
•
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Has the exclusive power to prosecute criminal
anti-competitive conduct
Responsible for undertaking prosecutions
(or making civil applications) to stop anticompetitive unilateral conduct
Alongside the business parties to a proposed
merger, the primary actor in the merger review
process
THE COMPETITION ACT
The Referees
• Criminal Courts
• The Competition Tribunal
• Other Civil Courts
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THE COMPETITION ACT
The Referees
•
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Applications brought by the Competition
Bureau or by private parties may come
before either the Criminal Courts, the
Competition Tribunal, or (for private
actions) other Civil Courts
THE COMPETITION ACT
Why is the Competition Act
important?
• The Competition Act contains meaningful
penalties and remedies to address
anti-competitive conduct
• An investigation by the Competition
Bureau may result in considerable costs,
lost time, and bad publicity
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THE COMPETITION ACT
Why is the Act relevant to WDA
waste reduction schemes?
• Agreements between competitors are subject
to intense scrutiny under the Act
• Even where economies of scale may dictate
a collective waste diversion solution, efficiencies
are not a relevant consideration when assessing
whether an agreement between competitors
violates the criminal conspiracy provisions
23 of the Act
THE COMPETITION ACT
The WDA and regulated conduct
• The “Regulated Conduct Defense”
protects against charges under the
Competition Act under certain
circumstances
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THE COMPETITION ACT
Application of the Competition Act
• The Competition Act applies to all conduct not
protected by the Regulated Conduct Defense
• Note that joint “lobbying” may also be excluded from
the application of the Act
• Relevant sections of the Competition Act for EPR
stakeholders include:
– Section 45: Conspiracy
– Part VIII: Reviewable conduct
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THE COMPETITION ACT
Conspiracy Offence
•
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45. (1) Every one who conspires, combines,
agrees or arranges with another person…to
prevent… lessen…. or otherwise restrain or
injure competition unduly… is guilty of an
indictable offence and liable to imprisonment
for a term not exceeding five years or to a
fine not exceeding ten million dollars or to
both.”
THE COMPETITION ACT
Conspiracy Offence
•
Can apply to any agreement between
competitors – the presence of secrecy
or intent to price-fix are not
determinative
•
Focuses on relationships with
competitors
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THE COMPETITION ACT
Conspiracy Offence
•
Agreements to unduly limit competition may be overt
(i.e., a formal agreement made at a meeting between
competitors)
-- or -•
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Agreements to unduly limit competition can also be
proven by inference, depending on the nature,
frequency and circumstances of communication
between competitors
THE COMPETITION ACT
Conspiracy Offence
• Criminal penalties are severe
• Civil actions may be brought by competitors/
consumers
• Differs from offense in the U.S. or E.U.
– it is not a per se offence to agree
– a likely adverse effect on competition
must also be shown
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THE COMPETITION ACT
Conspiracy Offense
• The conspiracy provision also identifies several
“safe areas” which may (in some cases) form
the subject of lawful discussions between
competitors
– However, this exemption in the Act states
that that discussion of these items is not
lawful if there is a resulting undue lessening
of competition
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THE COMPETITION ACT
Reviewable Conduct
• Section 79 – Abuse of Dominance
• Section 75 – Refusal to Deal
• Section 77 – Exclusive Dealing/Tied Selling
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THE COMPETITION ACT
Reviewable Conduct: Abuse of
Dominance
•
•
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It is not illegal to be “dominant”
– which typically means having 50%+
of market share in a given market
However, the Competition Tribunal
can restrain a dominant firm,
(or firms exercising “joint dominance”)
from "abusing" their dominant position
CANADIAN COMPETITION LAW
Part 3: Competition Law Risks for EPR
stakeholders
• Risks associated with IFOs
• How to avoid violating Canadian law
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EPR COMPETITION LAW RISKS
Risks associated with IFOs
Anti-competitive agreements with competitors
• Competitors working with the same IFO may
become subject to concerns about cartel or
other anti-competitive behaviour
Exclusionary conduct:
• Competitors who are not participating in a
collective waste reduction entity may complain
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EPR COMPETITION LAW RISKS
General Guidelines
•
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Firms interacting with their competitors via the mechanism of IFOs
should scrupulously observe the following guidelines:
– Do not consider or discuss matters of a competitively sensitive
nature, including future prices, marketing plans, conditions of
sale, costs or customers.
– Firm staff should not attend any meetings, under any
circumstances, unless there is a formal Agenda and Minutes are
taken.
– Information exchange within an IFO should be reviewed on a
case-by-case basis by legal personnel. Any proposal to
introduce a new information exchange or to change the scope of
existing exchanges should be discussed in advance.
– If a discussion arises during a meeting at which firm staff are
present which may raise competition law issues, stop the
discussion, leave, or contact legal personnel.
EPR COMPETITION LAW RISKS
How to avoid violating Canadian law
• In order to remain on safe territory as far as
reviewable conduct is concerned, the mandate
of the IFO should be clear, objective, and
non-discriminatory as to its:
– membership criteria,
– its object /purpose, and
– its structure and its procedures.
• Be careful not to set up an IFO or establish
standards that systemically work to exclude
certain players from the scheme or the market
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CANADIAN COMPETITION LAW
Carolyn N. Naiman
Partner
Blake, Cassels & Graydon LLP
37
February 2, 2009