Ch.32 Restrictive Trade Practices

Question 1

Forces of competition and the free market should regulate industry rather than government

Answer 1

Both Common Law and restrictive trade practices legislation protect competition

Control those activities that restrict or interfere with competition

Common Law not adequate

Question 2

Competition Act:

Answer 2

Controls anti-competition activity
- Unfair business practices and deceptive marketing

Prohibits combinations or conspiracies that prevent or lessen competition

Reviews mergers or monopoly actions that may operate to the detriment of the public

Applies to both federal and provincial Crown corporations as well as private sector

Question 3

Nature of the Legislation

Blend of criminal and administrative approaches to regulate restraint of trade

Answer 3

Some practices prohibited and subject to criminal proceedings

Some practices subject to review and control

Includes civil remedies for those injured by violations of the Act

Prohibited trade practices (15 in number) are enforced by criminal law standard of proof

Question 4

Commissioner of Competition:

Answer 4

Investigates complaints about violations

Wide powers of search and seizure

Right to compel parties to provide information

Allegations brought to their attention in form of an application for inquiry

Can enter premises of any person related to inquiry (usually after search warrant)

Apply to court to for order to interrogate)

Question 5

Competition Tribunal
Tribunal is the second component of Competition Act enforcement process:

Answer 5

Consists of lay members and Federal Court judges

All issues heard by panel of 3-5 members, presided over by one judge

Empowered to deal with:
- Trade practices designated as reviewable under Act
- Foreign laws and judgements
- Foreign suppliers
- Specialized agreements and mergers

Question 6

Reviewable activities:

Answer 6

Market restriction

Exclusive dealing

“Tied” selling

Consignment selling

Refusal to supply goods

Question 7

Common remedy

Answer 7

cease the restrictive activity or establish procedure to restore competition

Question 8

Dominant position

Answer 8

firm that controls a major segment of a market for a product or service

• By eliminating competitors by aggressive activity
• Merging with competitors

Question 9

Any merger or monopoly likely to lessen competition to detriment of public is subject to review and intervention by Competition Tribunal

Answer 9

Mergers or monopolies that substantially control market have potential for abuse

Criminal burden too high to be successful so most fall under protection of competition

Question 10

Conspiracy

Answer 10

Act provides that everyone who conspires, combines, agrees or arranges with another person to unduly lessen competition

Fines (up to $10 million) and imprisonment (up to 5 years) for violations

Need not prove complete or virtual elimination of competition but only that it will lessen or have the effect of likely lessening competition

Question 11

Exemptions

Answer 11

Export of products from Canada

Services - standards of competence or protection of public in either practice of the trade or profession, or in collection and dissemination of information

Banking – certain exceptions for some activities but not all

Affiliated corporations

Question 12

Bid-rigging

Answer 12

practice whereby contractors, in response to a call for birds or tenders, agree amongst themselves as to the price or who should bid or submit a tender

A restrictive trade practice, unless the person calling for the bids is advised of the arrangement
Eliminates secret arrangements
Not an offence if the fact is revealed to the person calling for the bids
Exemption allows parties to do projects jointly

Question 13

Price discrimination

Answer 13

practice of selling goods in an unfair or improper manner so as to lessen competition
- Seller must treat all competing purchasers in a fair and impartial manner
- Seller cannot grant buyers special rebates, promotional allowances, or grants for advertising

Question 14

Sellers cannot sell products in any area of Canada at prices lower than those elsewhere

Answer 14

If sales would lessen or eliminate competition

Question 15

Sellers prohibited from controlling price at which seller’s goods may be sold by others

Answer 15

Cannot influence price upwards of their products

Cannot discourage price reductions for resale

“Suggested retail price” a violation
- Unless reseller under no obligation and
- Can resell goods at a lower price

Question 16

Misleading or false advertising and other promotional activities subject to Competition Act

Answer 16

Any representation to the public that is false or misleading in any material respect

Materially misleading representation concerning the price
-Even if technically correct if impression given would mislead the public in some material way

Question 17

Sales above advertised price

Answer 17

publicly advertising a low price for goods, while maintaining a higher price for those goods at point of sale

• Geographical areas must be similar
• Exception: errors must be promptly corrected with further corrective advertising

Question 18

Double ticketing

Answer 18

• practice of attaching several different price tickets to goods
• Seller must sell goods at lowest of marked prices

Question 19

Bait-and-switch

Answer 19

publicly advertise a low price for certain goods, then stocking only different, higher-priced goods at point of sale

• Seller must establish they took steps to get adequate supply of product OR
• Seller did not anticipate heavy demand for advertised product

Question 20

Civil Actions Under the Competition Act
Actions possible:

Answer 20

Common Law civil action for restraint of trade

Competition Act
- Civil action by a party injured as a result of Act’s breach or violation of a Competition Tribunal order
- Amount limited to actual loss

Question 21

Burden of proof imposed on plaintiff in civil action

Answer 21

Based on balance of probability