RESTRICTED
WORLD TRADE WT/WGTCP/W/51
4December 1997
ORGANIZATION(97-5333)
Original: English Working Group ontheInteraction
between Trade andCompetition Policy
SUBMISSION FROM CANADA
Thefollowing communication, dated 26November 1997, hasbeenreceived fromthePermanent
Mission ofCanada withtherequest thatitbecirculated toMembers.
_______________
National Competition Policies, Laws andInstruments astheyRelate toTrade
Executive Summary
TheCompetition Acthasenabled theCanadian Government toopenuptheeconomy togreater
competition andfacilitated thestructural adjustment ofCanadian industry necessitated byglobal change.
TheActexpressly recognizes theroleofforeign competition andtheobjective ofenhancing Canadian
competitiveness. Ithasfostered stronger competition andmore intense rivalry intheCanadian
market-place, making Canadian companies more efficient andbetter abletocompete abroad. Inthe
longrun,anopen, competitive environment willserve topromote productivity growth andarising
standard ofliving.
Theexperience todatewithrespect totheenforcement oftheActsupports theobjectives of
Canadian competition policy asstated intheAct'spurpose clause. Thecases brought bytheDirector
andthejurisprudence developed indicate howflexible andbalanced theActisindealing with
anti-competitive abuses bydominant firms. The"total welfare" approach ingeneral, andwithrespect
tomerger analysis inparticular, isanexample oftheforward-looking, flexible approach tomerger
analysis needed forasmall, openeconomy.
TheCompetition Act
TheCompetition Actisaframework lawwhich establishes basicrulesfortheconduct ofbusiness
inCanada, withbothcriminal andnon-criminal provisions. Thepurpose clause oftheActsummarizes
thefourobjectives ofcompetition lawinCanada: (1)topromote theefficiency andadaptability of
theCanadian economy; (2)toexpand opportunities forCanadian participation inworld markets (while
atthesame timerecognizing theroleofforeign competition inCanada); (3)toensure thatsmall- and
medium-sized enterprises haveanequitable opportunity toparticipate intheCanadian economy; and
(4)toprovide consumers withcompetitive prices andproduct choices.
TheDirectorofInvestigationandResearchisanindependentlawenforcementofficialresponsible
fortheadministration andenforcement oftheAct.TheDirector 'sroleistoinvestigate, nottoadjudicate,
andheisempowered toconduct investigations withrespect tobothcriminal andcivilprovisions ofWT/WGTCP/W/51
Page2
theAct.TheCompetition Tribunal operates atarm'slength from theDirector andadjudicates civil
matters onapplication bytheDirector.
Traditionalenforcementactionsarecomplementedbyacomprehensiveprogrammetoencourage
voluntarycompliancewiththeAct.Thisprogrammeencompassesextensivepublicinformationactivities
toinform thepublic about theapplication oftheAct,andtheprovision ofadvisory opinions uponrequest.
Inaddition, theDirector publishes guidelines andbulletins tofoster public understanding ofhis
enforcement andcompliance policies.
TheActalsocontains explicit authority fortheDirector tomake interventions before federal
andprovincial regulatory agencies thatmake decisions affecting competition inparticular markets.
TheCompetition Bureau alsohastheopportunity toprovide input intothedesign andimplementation
ofother government policies thataffect thecompetitive market system (e.g., financial sector reform).
Thecoreprovisions ofthelegislation are:
Provisions applicable toallmergers inCanada, nomatter whatthesizeornationality
oftheparties. Firms arerequired tofulfil mandatory pre-notification requirements
when transactions exceed particular monetary thresholds. Theassessment ofmergers
bytheBureau focuses onthequestion ofwhether aproposed transaction islikely to
prevent orlessen competition substantially. There isanexception from thegeneral
merger provisions where amerger isconsidered likely tobring about gains inefficiency
thatwilloffset theeffects ofanylessening ofcompetition.
Criminalprovisionstodealwithseriouscompetition-relatedoffencessuchasconspiracies
inrestraint oftrade, bid-rigging, predatory pricing, price discrimination andprice
maintenance.
Non-criminal reviewable matters provisions todealwithbusiness conduct suchasabuse
ofadominant position.
Competition andintellectual property rights
Thecreation ofwealth isbecoming ahighly knowledge-intense activity; innovation hasbecome
critical tothecompetitiveness andprosperity ofbusiness, industries andnational economies. Two
framework policies -competition policy andintellectual property rights (IPRs) -arepivotal ingenerating
anenabling environment forinnovative dynamism.
Ingeneral, theActprovides aflexible, market-oriented framework fordealing withbusiness
arrangements andpractices relating toIPRs. TheActprovides remedies todealwithawide range
ofanti-competitive practices thatmayoccur inthecontext oflicensing arrangements. Atthesame
time,therelevantstatutoryprovisionsincorporateappropriatefiltersthatfocustheprovisionsonsituations
involving significant market power andfacilitate consideration ofpotential efficiency justifications for
particular practices.
Trade andcompetition
Trade liberalization andcompetition policy share broadly similar goals. Bothseektoensure
thatartificial barriers tothecompetitive process areremoved tothegreatest extent possible inorder
toencourage efficiency intheproduction andallocation ofgoods andservices. Domestic competition
lawscomplement trade liberalization agreements byensuring thatthebenefits ofsuchagreements areWT/WGTCP/W/51
Page3
notnegated byprivate restraints totrade. Strong competition indomestic markets alsohelps tosmooth
thestructural adjustments which canresult from trade liberalization.
Theclose relationship between competition policy andinternational trade isdirectly reflected
inseveral provisions oftheAct.Withtradeliberalization, Canadian competition authorities aregiving
greater weight totheroleforeign competition canplayinensuring thecompetitive structure ofdomestic
markets.
Since theearly1980s, theDirector hasintervened asapartyinseveral casesbefore theCanadian
International Trade Tribunal anditspredecessors toaddress questions ofmaterial injury andpublic
interest. Aswell, theCompetition Bureau hasplayed animportant roleinthereform ofanti-dumping
andcountervailpolicyinCanada.Mostrecently,theCompetitionBureaumadeanumberofsubmissions
andanappearance before aspecial House ofCommons 'Committee examining theSpecial Import
Measures Act.
Competition policy hasalsobeenaddressed inanumber ofregional freetrade agreements.
IntheNorth American FreeTrade Agreement (NAFTA) there isanexplicit inclusion ofcompetition
law;Chapter 15reflects acommitment inprinciple tomaintain andenforce national competition laws
andtopromote effective competition lawenforcement intheNorth American freetrade area. Inthe
Canada-ChileFreeTradeAgreement,thepartiesagreedtoincorporatelanguagesimilartothatofNAFTA
oncompetition.
International cooperation
Investment andtrade liberalization hasaccelerated theintegration ofeconomies, substantially
increasing thelevelofcross-border trade, investment andtheexchange oftechnology. The"nationality"
ofcorporations hasbecome moredifficult toascertain inthewakeoffar-reaching investment andcapital
market liberalization. Globalization andtheemergence oflarge, "stateless" corporations areplacing
newpressures ontheinternational anti-trust system. These pressures havebrought theinternational
elements ofantitrust matters totheforefront. While theneedtoprotect competition within anation 's
boundaries hasretained itsimportance, theimpact ofcompetition policy enforcement increasingly cuts
across borders, asmarkets become more andmore international.
Sustained anddetermined effort tocooperate intheenforcement ofexisting lawswillhelpto
promote alevel ofcompatibility among thebasic objectives andrules associated withcompetition,
under which domestic andforeign business enterprises willoperate, without compromising anation 's
fundamental righttoregulate initsownterritory. Inthelongterm, greater consistency andcoherence
ofcompetition lawsandpractices across jurisdictions willassist inminimizing thefriction thatmay
arisefrom theextraterritorial impact ofantitrust enforcement.WT/WGTCP/W/51
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NATIONAL COMPETITION POLICIES, LAWS AND INSTRUMENTS
Table ofContents
1. Introduction ..............................................5
2. TheObjectives ofCanadian Competition Policy ........................5
2.1 TheCompetition Act....................................6
2.2 Overview ofkeyprovisions ................................7
2.2.1 Conspiracy .....................................7
2.2.2 Predatory pricing .................................8
2.2.3 Price discrimination ...............................9
2.2.4 Vertical restraints .................................9
2.2.5 Abuse ofdominance ...............................10
2.2.6 Mergers .......................................10
3. Advocacy ................................................12
4. TheCompetition Policy/Intellectual Property Rights /Innovation Nexus .........13
4.1 Competition policy .....................................13
4.2 Intellectual Property Rights (IPRs) ...........................14
4.3 Thetreatment ofintellectual property rights under theAct............15
5. TheInterface Between Competition Policy andTrade Policy ................17
6. International Cooperation ......................................18
7. Conclusion ...............................................20WT/WGTCP/W/51
Page5
NATIONAL COMPETITION POLICIES, LAWS AND INSTRUMENTS
ASTHEY RELATE TOTRADE
1. Introduction
There hasbeenafundamental shiftineconomic philosophy overthepastdecade away from
thegovernment interventionist approach which prevailed inthepastandtowards anewvision ofan
economy discussed inglobal terms inwhich competitive forces arethekeyfactor shaping thisglobal
economy. There aretwomanifestations ofthistrend towards greater emphasis oncompetitive market
forces. Attheinternational level, successive rounds ofmultilateral trade liberalization efforts have
opened newdoors andoffered increased market access worldwide. Aswell, multilateral efforts have
beensupplemented byregional andbilateral agreements, suchasNAFTA andtheCanada-Chile Free
Trade Agreement.
Liberalization ontheinternational fronthasbeenreinforced domestically byanincreasing trend
toward privatization andderegulation inmost countries oftheworld. National governments are
increasingly aware oftheadverse effects inefficient regulation canhaveonproductivity, growth and
economic performance. Regulatory reform hasbeenundertaken bynumerous countries tosharpen
competitive pressure, thereby encouraging firms tobecome moreefficient, innovative andcompetitive.
Theincreased acceptance ofthemarket-based model ofeconomic development hasmeant more
countries haveeither implemented, orstrengthened, competition laws. While thereisgeneral agreement
thatthepromotion ofeconomic efficiency istheprimary goalofcompetition policy, inanumber of
countries thegoals arebroader innature andinclude opening upmarkets togreater opportunities,
restructuring ofenterprises andlessening intheconcentration ofeconomic power.
Themajor antitrust jurisdictions andtheinternational policy community recognize thatstrong
competition policy isneeded topromote efficiency andcompetitiveness, strengthen internal markets
andensure that,asgovernment-imposed barriers come down, theyarenotreplaced byprivate restraints
totrade -cartels (both domestic andinternational), anti-competitive mergers andabuses ofdominant
position. Moreover, thereisagrowing bodyofliterature which indicates thatstrong rivalry indomestic
markets, supported byvigorous antitrust enforcement, helps toensure thatthepotential gains from
tradeliberalization arrangements areactually realized, andthatthesebenefits areshared equitably among
market-place participants. Strong competition indomestic markets alsohelps tosmooth thestructural
adjustments which canresult from trade liberalization.
2. TheObjectives ofCanadian Competition Policy
Canadian competition policy focuses onthegoals ofprotecting andpreserving competition
andpromoting economic efficiency. Theconcept ofeconomic efficiency asanobjective ofcompetition
policy inCanada andelsewhere hasfurther evolved toencompass thegoal ofinternational
competitiveness. Increased efficiency isnowwidely acknowledged asthekeytoimproved Canadian
performance inworld markets.1Atthesametime, ithasbeennoted thatforeign competition viaimports
canplayakeyroleinlimiting thepotential forabuse ofmarket power inthedomestic economy.2
1Foranelaboration oftheevolution oftheobjectives ofCanadian competition law,seeP.K. Gorecki and
W.T. Stanbury, TheObjectives ofCanadian Competition Policy, 1888-1983 (Montreal: TheInstitute forResearch
andPublic Policy, 1984).
2Bureau ofCompetition Policy, Canadian Competition Policy: ItsInterface WithOther Economic andSocial
Policies (September 1989)WT/WGTCP/W/51
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2.1 TheCompetition Act3
Canada'scompetitionlawwassubstantiallyrevisedandmodernizedin1986,whenthelegislation
wasre-titled astheCompetition Act(hereafter the"Act").TheActisaframework lawwhich establishes
basic rules fortheconduct ofbusiness inCanada, withbothcriminal andnon-criminal provisions.
Thepurpose clause oftheActsummarizes theobjectives ofcompetition lawinCanada.
Specifically, itsintent istomaintain andencourage competition inCanada, insupport offourspecific
objectives: (1)topromote theefficiency andadaptability oftheCanadian economy; (2)toexpand
opportunities forCanadian participation inworld markets (while atthesame timerecognizing therole
offoreign competition inCanada); (3)toensure thatsmall andmedium-sized enterprises havean
equitable opportunity toparticipate intheCanadian economy; and(4)toprovide consumers with
competitive prices andproduct choices.
TheActappliestopracticallyallsectorsoftheeconomy.Activitiesspecificallyexemptedinclude
collective bargaining andamateur sport, those subject toCrown immunity4andthose thatfallwithin
theso-called regulated conduct defence inthejurisprudence.5Therules under theActdiffer
fundamentally from direct economic regulation byaboard ortribunal inthattheyestablish abroad
framework within which businesses arelargely self-governing. Ahighdegree ofvoluntary compliance
withtherules oftheActisrelied upon, thereby precluding theneedforongoing monitoring ofthe
behaviour andperformance offirms.
TheDirector ofInvestigation andResearch (hereafter the"Director") isanindependent law
enforcement official responsible fortheadministration andenforcement oftheAct.Heisappointed
bytheGovernor-in-Council. Employees oftheCompetition Bureau constitute theDirector 'sstaff.
TheDirector 'sroleistoinvestigate, nottoadjudicate, andheisempowered toconduct investigations
withrespect tobothcriminal andcivilprovisions oftheAct.Evidence ofcriminal matters isreferred
totheAttorney General ofCanada forpossible prosecution inthecriminal courts. With regard to
civilmatters, theDirector mayapply totheCompetition Tribunal forremedial orders designed to
preserve orrestore competition.
TheDirector cancommence aninquiry when hehasreasonable grounds tobelieve there are
grounds formaking anorder under acivillawprovision oranoffence hasbeen, orisabout tobe,
committed. TheDirector isalsoobliged tocommence aninquiry iftheresponsible Minister sodirects,
orwhen sixCanadian residents make application. Thediscontinuance ofaninquiry mustbereported
3Competition Act,R.S.C. 1985, C-34, asamended
4TheSupreme Court ofCanada confirmed theapplication ofCrown immunity forcompetition lawoffences
inR.v.Eldorado Nuclear Ltd.,(1983) 2S.C.R. 551,50N.R. 120,776C.P.R. (2d)1.However, section 2.1
oftheAct,enacted since thatdecision wasrendered, provides thatthelawisbinding onanagent ofthefederal
orprovincial government thatisacorporation "inrespect ofcommercial activities engaged inbythecorporation
incompetition, whether actual orpotential, withother persons totheextent thatitwould apply iftheagent were
notanagent ofHerMajesty".
5Theessenceoftheregulatedconductdefenceisthatspecificactivitywhichisauthorizedorcarriedoutpursuant
toavalid scheme ofregulation isdeemed tobeinthepublic interest. Assuch, itcannot befound tobeinviolation
ofthecriminal provisions oftheAct.There isnoconclusive jurisprudence withrespect tothecivilprovisions
oftheActanditremains forthecourts andtheCompetition Tribunal todetermine thefullscope ofthedefence.
Forafuller elaboration, seeR.D. Anderson, A.Hollander andJ.Monteiro, "Competition Policy andRegulatory
Reform inCanada, 1986-1997", Review ofIndustrial Organization (forthcoming) andD.Mercer, TheRegulated
Conduct Defence andtheTelecommunications Sector (1995).WT/WGTCP/W/51
Page7
totheMinister whocanorder further inquiry. TheMinister, however, cannot order theDirector to
discontinue aninquiry orgivedirections astoitsconduct.
Traditionalenforcementactionsarecomplementedbyacomprehensiveprogrammetoencourage
voluntarycompliancewiththeAct.Thisprogrammeencompassesextensivepublicinformationactivities
toinform thepublic about theapplication oftheAct,andtheprovision ofadvisory opinions uponrequest.
Inaddition, theDirector publishes guidelines andbulletins tofoster public understanding ofhis
enforcement andcompliance policies.
TheActalsocontains explicit authority fortheDirector tomake interventions before federal
andprovincial regulatory agencies thatmake decisions affecting competition inparticular markets.
TheCompetition Bureau alsohastheopportunity toprovide input intothedesign andimplementation
ofother government policies thataffect thecompetitive market system (e.g., financial sector reform).
Finally, theBureau alsorepresents Canada 'sinterests ininternational competition policy fora.
Inaddition tothecoreprovisions ofthelegislation dealing withagreements inrestraint oftrade,
mergers, abuse ofdominant position, conspiracy andother matters, theActincludes provisions dealing
withspecialization agreements which allow twoormorefirms toreorganize theirproduction andproduct
linestoachieve theefficiency gains made possible byspecialization andlonger production runs. Unlike
theother non-criminal provisions oftheAct,private parties mayapply totheCompetition Tribunal
toauthorizetheregistrationofspecializationagreements.Thisauthorizationofaspecializationagreement
exempts itfromtheapplication oftheconspiracy, tiedselling, exclusive dealing andmarket restriction
provisions oftheAct.
Separate legislation which wasalsoadopted in1986, theCompetition Tribunal Act6,provides
fortheestablishment oftheCompetition Tribunal (hereafter the"Tribunal") which adjudicates civil
matters onapplication bytheDirector.7TheTribunal operates atarm'slength from theDirector.
Itincludes judges drawn fromtheFederal Court, TrialDivision, andlaymembers, whoaretypically
economists orindividuals withbusiness experience.
Decisions oftheTribunal cannot beappealed totheFederal Cabinet onpublic interest orother
grounds. Thisstands incontrast withother economic framework legislation inCanada, suchasthe
Communications Act,where decisions oftheCanadian Radio-television andTelecommunications
Commission ("CRTC") maybeappealed toCabinet. Similarly, decisions oftheDirector havebeen
characterized asadministrative bythecourts withverylimited scope forjudicial review.
2.2 Overview ofkeyprovisions
2.2.1 Conspiracy
Akeyprovision oftheActistheconspiracy provision. Section 45makes itacriminal offence
foranyperson toconspire, combine, agree orarrange withanother person toprevent, limitorlessen
competition unduly.8Section 45listsseveral exceptions totheconspiracy provision, including
6R.S.C. 1985, c.19(2nd Supp.)
7TheRestrictiveTradePracticesCommissionwasabolishedwiththeestablishmentoftheCompetitionTribunal.
8TheSupremeCourtofCanadadecisioninthePharmaceuticalAssociationofNovaScotia(PANS)caseconfirms
thatthetestofundueness embodies apartial "rule ofreason" standard. Thisrequires thattheseriousness or
significance oftheeffect(s) ofaparticular anti-competitive agreement beconsidered. Thetestdoesnotgoso
(continued...)WT/WGTCP/W/51
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cooperative arrangements relating toresearch anddevelopment, theexchange ofstatistics, anddefining
product standards. These exceptions donotapply incircumstances where anagreement islikely to
lessen competition inrespect ofprices, thequantity andquality ofproduction, markets orcustomers,
ordistribution channels. Iftheconspiracy relates onlytotheexport ofproducts from Canada, the
provision doesnotapply, provided theconspiracy doesnotresult inareduction orlimitation ofthe
realvalue ofaproduct, norrestricts anyperson fromentering intoorexpanding thebusiness ofexporting
products from Canada.
Section 46oftheActalsoprohibits theimplementation offoreign directives thatgiveeffect
toaconspiracy, combination, agreement orarrangement that,ifentered intoinCanada, would bein
contravention ofsection 45.9
TheActalsocontains aperseprohibition against bidrigging, section 47,andagreements or
arrangements among banks withrespect tointerest rates, service charges andother specified matters.
2.2.2 Predatory pricing
Section 50(1)(c) oftheActmakes itacriminal offence toengage inapolicy ofselling products
atprices unreasonably lowthathastheeffect ortendency ofsubstantially lessening competition or
eliminating acompetitor, orisdesigned tohavethateffect.10
Ithasbeenrecognized thatadistinction should bemade between predatory pricing andotherwise
vigorous, buthealthy price competition. Inviewofthefactthatthere hasbeenlittlejurisprudence
inthisareatoguide thebusiness community, andtoremove anychilling effect thattheexistence of
theprovision mayhaveonvigorous price competition, theDirector published thePredatory Pricing
Enforcement Guidelines .11Under theguidelines, rather thanfocusing initially onwhether thealleged
predator 'sprices arebelow cost,emphasis isplaced onthelikelihood ofthefirmbeing abletorecoup
itslosses inalaterperiod. Thisinvolves ananalysis ofmarket power, theability ofthealleged predator
toprofitably maintain prices above thelevelthatwould prevail incompetitive conditions.
According totheguidelines, prices atorabove average totalcost("ATC") willnotberegarded
asunreasonably lowunder anycircumstances. Prices below average variable cost("AVC") arelikely
toberegarded asunreasonably lowintheabsence ofaclearjustification, suchastheneedtoselloff
perishable orobsolete inventory. Prices inthe"grey range" between ATC andAVC callforan
8(...continued)
farastopermitpotentialefficiency-relatedbenefitswhichderivefromcooperativearrangementsamongcompetitors
tobeconsidered. Initsdecision, theCourt alsoelaborated onitsviews regarding themajor elements ofthe
examination mandated under theconspiracy provisions. With respect tomarket structure, thecourt clearly
emphasized thatthemain objective istodetermine thedegree ofmarket power enjoyed bytheparties tothe
agreement. Market share, while arelevant factor, isnotdeterminative andmust beconsidered inthecontext
ofother relevant factors. SeeR.v.Nova Scotia Pharmaceutical Society (1992), 43C.P.R. (3d)1(S.C.C.).
9SeeR.v.Sumitomo Canada Limited (19November 1993), Ottawa T-2687-93 (F.C.T.D.)
10Subsection 50(1)(b) alsoprohibits "geographic price discrimination", aform ofpredatory pricing where
theharm tocompetition occurs asaresult ofthenegative effects oncompetitors ofthefirmengaging inthe
prohibited pricing policy. Subsection 50(1)(c) contains themore general prohibition against predatory pricing.
Itdiffers from subsection 50(1)(b) inthatthere isnorequirement fortheCrown toshow differential pricing in
different areas ofCanada. However, thepricing must be"unreasonably low", constitute apolicy andhave a
deleterious effect oncompetition oronacompetitor ofthefirmpricing unreasonably low.
11SeePredatory Pricing Enforcement Guidelines ,Consumer andCorporate Affairs Canada, 1992WT/WGTCP/W/51
Page9
examination ofthesurrounding circumstances, including demand conditions, excess capacity12,whether
thefirminquestion waslossminimizing andevidence ofcompetitive intent.13
Predatory pricing activity mayalsobeaddressed under theabuse ofdominance provision,
section 79(seediscussion ofthisprovision below).
2.2.3 Price discrimination
Price discrimination iscovered under section 50(1)(a) oftheAct,which requires thattheseller
mustnotonlyknowingly discriminate between competitors inthepurchase ofanarticle, butmustengage
inapractice ofdiscriminating.14
There islittlejurisprudence inthisarea. Asaresult, theDirector issued Price Discrimination
Enforcement Guidelines in1992 which describe hisenforcement policy. TheDirector observed in
thepreface totheGuidelines thataprimary reason fortheirpublication istoensure thatbusiness persons
donot,because ofuncertainty about theapplication ofthelaw,"refrain tosome extent fromengaging
informs ofpricing behaviour which would behealthy andbeneficial forthemarkets involved".
Assessments under section 50(1)(a) essentially involve aretrospective examination oftheselling
conditions which wereatplayatthetimecompeting purchasers wereengaged indealing ornegotiating
withacommon seller toacquire articles from theseller. Price discrimination doesnotrequire the
Director toshow theextent towhich competition islessened inthemarkets involved.
Thecruxofreviewing amatter under theguidelines willofteninvolve determining whatprices
(including concessions) were"available" totheallegedly disadvantaged competitor atthetimeofthe
saleinquestion totheallegedly favoured purchaser. Ifthesameprices wereavailable tobothpurchasers
butnotacted uponbyone,thefactthatapurchaser paidhigher prices should notraiseaquestion under
thesection, evenifalloftheother elements oftheprovisions were satisfied.15
2.2.4 Vertical restraints
TheActcontains several provisions relating tovertical restraints, including thecriminal price
maintenance provisions insection 61andthereviewable practices ofconsignment selling (section 76),
exclusive dealing, tiedselling andmarket restriction (section 79).
Intherecent past,there hasbeenadecline inthenumber ofprosecutions under some ofthese
provisions. Developments intheeconomic theory ofvertical restraints hasledtotheconclusion that
pricemaintenance maybeefficient andultimately pro-competitive insofar asitdiscourages intra-brand
12Foradiscussion oftheissue ofexcess capacity, seeR.v.Consumers Glass Co.(1981), 33O.R. (2d)228,
14B.L.R. 172, 60C.C.C. (2d)481, 124D.L.R. (3d)274(H.C.).
13SeeR.v.Hoffman-La Roche (1981), 33O.R. (2d)694,15B.L.R. 217,58C.P.R. (2d)1,24C.R. (3d)
193, 62C.C.C. (2d)118, 125D.L.R. (3d)607(C.A.)
14Forafulldiscussion ofthehistory ofthisprovision, please seeGorecki andStanbury, supra ,note1,at124.
15Section 50(1)(a) prohibits discriminatory pricing where theharm tocompetition occurs asaresult ofthe
"disfavoured purchaser" being placed atacompetitive disadvantage. SeeR.S.Nozick, "The Regulation ofPrice
Discrimination Under theCombines Investigation Act" (1976), 54C.B.R. 309, foradetailed analysis ofthe
elements oftheoffence under section 50(1)(a).WT/WGTCP/W/51
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competition, andmaybeconducive toincreased inter-brand competition.16Nevertheless, theBureau
continues toassess complaints regarding alleged price maintenance onacase-by-case basis.
2.2.5 Abuse ofdominance
Theabuse ofdominance provision, section 79,isoneofthekeyelements oftheAct.Forthe
provisiontoapply,oneormorepersonsmustsubstantiallycontrolaclassofbusinessthroughoutCanada,
andhaveengaged in,orcurrently beengaging in,apractice ofanti-competitive actsthathastheeffect
ofpreventing orlessening competition substantially. Inthese circumstances, theTribunal mayissue
anorder prohibiting orotherwise remedying theanti-competitive conduct atissue.
However, when considering whether thepractice ofanti-competitive actsishaving orislikely
tohavetheeffectofpreventingorlesseningcompetitionsubstantially,theTribunalmayconsiderwhether
thepractice isaresult ofsuperior competitive performance. Thisprovision recognizes thatconsumers
benefit when product innovation orimproved distribution systems result inafirmout-distancing its
rivals inthemarket-place. Thelegislation alsoprovides thatthelegitimate exercise ofintellectual
property rights isnotananti-competitive act.
Theabuse ofdominance provisions areparticularly important inthecontext ofaderegulated
andprivatized business environment andcanbeinstrumental inassisting inthetransition fromregulation
toderegulation. Moreover, theyhelptoensure thatdominant domestic firms donotpreclude the
competitive discipline promised bytheremoval oftrade barriers andincreased foreign competition.
Considerable experience hasbeendeveloped withrespect totheabuse ofdominance provision
onsuchissues asmarket definition, contract exclusivity, allocation ofmarkets, theconcept ofjoint
dominance, directed salesandthecreation ofbarriers toproduct innovation.17Inaddition togaining
experience ininvestigating andlitigating these cases before theTribunal, several procedural issues,
suchastheroleofintervenors andconfidentiality, havebeenresolved bytheTribunal andthecourts.
TheTribunal 'sdecisions onthese cases have been particularly significant withrespect to
enforcement policy. Exclusionary andrestrictive clauses areafrequent occurrence incertain industries '
contracts. Where suchclauses donothaveanyproper business justification andserve individual
companies orgroups ofcompanies onlyinprotecting theirdominant positions bycreating barriers
toentry, theDirector canseekcorrective action.
2.2.6 Mergers
Themerger provisions apply toallmergers intheeconomy thatinvolve theacquisition orthe
establishment ofcontrol overorasignificant interest inthewhole orapartofabusiness ofacompetitor,
supplier, customer orotherperson. Firms arerequired tofulfilmandatory pre-notification requirements
16Forafuller elaboration ofthetreatment ofthisissue, seeR.D. Anderson, L.Csorgo andC.West, "Resale
Price Maintenance inCanada", paper prepared fortheOECD Roundtable onResale Price Maintenance,
12-13 February 1997, Paris.
17SeeCanada (Director ofInvestigation andResearch) v.TheD&BCompanies (Canada) Ltd.(1996), 64
C.P. R.(3d), 216,(the“Neilsen ”case); Canada (Director ofInvestigation andResearch) v.Bank ofMontreal
(Interac)(Comp.Trib.,CT9502/92,June20,1996(unreported);Canada(DirectorofInvestigationandResearch)
v.TheNutraSweet Co.(1990), 32C.P.R. (3d)1;Canada (Director ofInvestigation andResearch) v.Laidlaw
Waste System Ltd.(1992), 40C.P.R. (3d)289;Canada (Director ofInvestigation andResearch) v.Tele-Direct
(Publications)Inc.(26February1997),Comp.Trib.,(CT-94/3);Canada(DirectorofInvestigationandResearch)
v.AGT Directory Ltd.,(18November 1994), Comp. Trib., (CT-94/2)WT/WGTCP/W/51
Page11
when transactions exceed particular monetary thresholds.18Theassessment ofmergers bytheBureau
focuses onthequestion ofwhether aproposed transaction islikely toprevent orlessen competition
substantially. Theassessment isnotbased strictly onmarket share orconcentration.19Rather, the
Actspecifies thattheTribunal (andtherefore theBureau) mayalsoconsider anumber ofqualitative
factors relevant tocompetition inmarkets including, inter alia,theextent ofeffective foreign
competition20,whether oneofthemerging parties isfailing, theexistence ofanybarriers toentry
(includingregulatorybarriers)andthenatureandextentofinnovationinthemarketsunderexamination.21
These qualitative considerations arediscussed indetail intheDirector 's1991 Merger Enforcement
Guidelines .22
Asnoted, theActalsoprovides foranefficiency exception intheevent thatasubstantial
prevention orlessening ofcompetition isfound tobelikely. Themerging parties mustdemonstrate
thatthegains inefficiency which willlikely arisefromthemerger willbegreater than, andwilloffset,
theeffects ofanylikely substantial prevention orlessening ofcompetition, andthatthese gains would
notlikely beattained ifaprohibition order wereobtained.23Moreover, theActexpressly directs the
Tribunal toconsider whether efficiency gains arelikely toresult insignificant increases inthereal
value ofexports orsignificant substitution ofdomestic products forimported products. Thislatter
provision emphasizes theobjective, setoutinthepurpose clause oftheAct,ofexpanding opportunities
forCanadian participation inworld markets. Towards thisend,theBureau requires theprovision of
18Thelawcontains provisions which require pre-notification oflarge merger transactions, where thecombined
revenues orassets oftheparties exceed Can$400 million andthegeneral value oftheacquisition target itself
exceeds Can$35 million inrevenue orassets, apart from amalgamations, where theasset threshold is
Can$70 million.
19IntheHillsdown case, theTribunal noted thatwhile market share cangiveaprima facie indication as
towhether amerger islikely toleadtoanenhancement ofmarket power, theDirector isresponsible foradducing
some evidence regarding barriers toentry. Specifically, theTribunal observed that"intheabsence ofentry
barriers, itisunlikely thatamerged firmcould maintain supra-competitive profits, regardless ofmarket share
orconcentration". SeeCanada (Director ofInvestigation andResearch) v.Hillsdown Holdings (Canada) Ltd.
(1992), 41C.P.R. (3d)289.
20TheABB-Westinghouse casefocused attention onrestructuring inresponse tothelowering oftrade barriers
asaresult ofcommitments made under theCanada-U.S. Free Trade Agreement (CUSTA). TheCompetition
Tribunal issued aConsent Order requiring Asea Brown Boveri Inc.(ABB) todivest certain assets acquired from
Westinghouse intheevent thatitwasunable toobtain specific tariff relief measures forimports ofmedium and
large power transformers. Tariff protection wasviewed bytheDirector asasignificant barrier toentry inrelation
tocompetitionintheCanadianmarketplace.ThePrivyCouncilissuedanordergivingeffecttotheimplementation
ofaccelerated tariff reductions under CUSTA asrequired bytheConsent order. SeeCanada (Director of
Investigation andResearch) v.Asea Brown Boveri Inc.,(C.T., December 18,1989 [unreported]).
21Foradiscussion oftheissue oftheappropriate weight togivetoindicators ofthelackofcompetition, see
Canada (Director ofInvestigation andResearch) v.Southam Inc.,(1992) 43C.P.R. (3d)161;Canada (Director
ofInvestigation andResearch) v.Southam Inc., Federal Court ofAppeal, FileNo.A-1093-92; Southam Inc.
v.Director ofInvestigation andResearch, Federal Court ofAppeal, FileNo.A-1668-92.
22SeeDirector ofInvestigation andResearch, Merger Enforcement Guidelines (March 1991), pp.45-52 and
Appendix 2
23TheTribunalinHillsdown,supra,note21,discussedthetreatmentofefficienciesunderthemergerprovisions.WT/WGTCP/W/51
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meaningful dataandverifiable information byparties toback uptheir claims ofefficiency gains,
expanded exports andimport substitution claimed toresult from amerger.24
Inspecific circumstances, theDirector shares jurisdiction formergers withother agencies of
thefederal government. TheCRTC hasjurisdiction overcertain industries regulated under the
Communications Act.TheMinister ofIndustry isresponsible forreviewing large mergers involving
non-Canadians under theInvestment Canada Act.Lastly, theMinister ofFinance hasresponsibility
forapproving mergers ofcertain financial institutions under several pieces oflegislation.25While the
Director 'sroleinmerger review isprimarily investigative andastheapplicant fororders tobeissued
bytheTribunal, theCRTC andInvestment Review Division ofIndustry Canada perform essentially
administrative lawfunctions.
Revitalization oftheconsent order process isarecent significant development withrespect
tomerger review inCanada. InSeaspan26andCanada Waste27,theTribunal issued consent orders
inFebruary andApril 1997, respectively. TheDirector filedanapplication foraconsent order in
ADM-Maple LeafMills28inMarch 1997. Inaddition tostructural relief, divestiture offixed assets
andcustomer contracts, anattractive feature ofconsent orders under themerger provisions oftheAct
isthecapacity toinclude behavioural provisions, suchassupply contracts, intheremedial order.
3. Advocacy
Sections 125and126oftheCompetition Actprovide theDirector withtheindependent authority
tomake representations inrespect ofcompetition tointervene, andcallevidence before boards,
commissions andother tribunals. Inconducting itsadvocacy work, theBureau focuses onhearings,
reviews andother proceedings inwhich asignificant contribution canbemade toward enhancing or
protectingcompetitioninamarket.Examplesofcompetitionissuesorproblemsthathavebeenaddressed
ininterventionsincludelicensingorothersuchentryrestrictions,unnecessaryimpedimentstocompetition
created bytheregulatory, legalandinstitutional structure ofindustry, anti-dumping duties andother
impediments toimport competition and,finally, establishing theterms forcompetitive access toessential
facilities. Since 1976, theCompetition Bureau hasmade approximately 200written submissions.29
There isastrong complementarity between devoting resources tocompetition advocacy and
enforcing theActinparticular sectors. Effective advocacy work which results inliberalization of
regulations governing particular sectors mustbefollowed byavigorous enforcement programme to
prevent private anti-competitive practices thatcould nullify thegains from regulatory reform. Asa
24Forelaboration, seeM.Sanderson, Efficiency Analysis inCanadian Merger Cases (Competition
Bureau, 1996).
25These include theBank Act,R.S.C. 1985, c.B-1.01; theInsurance Companies Act,R.S.C. 1985, c.I-11.8;
andtheTrust andLoans Companies Act,R.S.C. 1985, c.T-19.8. Regarding mergers infederally regulated
transportation industries, suchasmarine shipping andairtransportation, theNational Transportation Agency
ceased tohave thepower under theNational Transportation Acttoreview such mergers after 1996.
26Canada (Director ofInvestigation andResearch) v.Dennis Washington et.al.CT-96/01 (unreported)
27Canada (Director ofInvestigation andResearch) v.Canadian Waste Services Inc.CT-97/1 (unreported)
28Canada (Director ofInvestigation andResearch) v.ADM Agri-Industries, Ltd.CT97/02
29SeeR.D. Anderson, AHollander, J.Monteiro andW.T. Stanbury, "Competition Policy andRegulatory
Reform inCanada, 1986-1997", Review ofIndustrial Organization, forthcomingWT/WGTCP/W/51
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result ofregulatory reform inthepastyears, theDirector hasseenasubstantial increase inhis
responsibilities interms oftheamount ofeconomic activity which issubject totheAct.
4. TheCompetition Policy/Intellectual Property Rights /Innovation Nexus
Thecreation ofwealth isbecoming ahighly knowledge-intense activity. Theimportance of
knowledge asasource ofwealth isexpanding andtransforming industries. Asaresult, innovation
hasbecome critical tothecompetitiveness andprosperity ofbusiness, industries andnational economies.
Keystrategicorenablingtechnologies(e.g.,informationandcommunicationstechnologies)areproviding
thebasisforthisrevolutionary transformation ofindustry worldwide. Theenabling technologies are
notonlybeing usedtodevelop newgoods andservices, theyarerevolutionizing themethods bywhich
goods andservices areproduced.
Canada 'ssuccess intheemerging knowledge-based, global economy depends onitsability
todevelop andapply newtechnologies, bothinreforming existing industries andcreating newones.
Knowledge-based innovation provides thebestmeans forsmaller countries suchasCanada toestablish
themselves ontheworld economic scene. Innovation isthekeytocompetitive advantage, todelivering
higher value-added products andservices withfewer resources andatlower cost.
Thecentral issueforCanadian economic development ishowtocraftandimplement policies
toencourageinnovationandtheapplicationoftechnologytoallfacetsofproductdevelopment,production
andservice. Twoframework policies -competition policy andintellectual property rights policy -
arepivotal ingenerating anenabling environment forinnovative dynamism. Moreover, these two
policies arecomplementary indriving thewealth-creating innovation process.
4.1 Competition policy
Thedirection andenforcement oftheActistowards thepromotion ofamore dynamic, efficient
andadaptable economy thatwillpromote sustained economic growth andarising standard ofliving.
Technological progress improves products, reduces costs anddevelops newproducts. Essentially,
innovation isaprime driver inenhancing thecompetitiveness oftheCanadian economy. Sound
competition policy anditseffective enforcement influence theability andwillingness offirms topursue
innovative activities.
Innovation hasimplications forbothmarket power andefficiency. Forexample, cooperation
limited toR&D, nothaving anti-competitive effects, isadefence tocriminal conspiracy. Acivil
provision intheActpermitting theregistration ofspecialization agreements, which concern twoor
moreparties jointly rationalizing production, provides anexception tothecriminal conspiracy provision.
Under theabuse ofdominance provisions oftheAct,thereisarequirement that,inestablishing
abuse, theTribunal consider whether thepractice inquestion istheresult ofsuperior competitive
performance.30Aswell, afinding ofabuse requires notmerely thatapractice havetheeffect of
substantially lessening competition, butthatitbe"apractice ofanti-competitive acts". TheTribunal
hasinterpreted thistomean thatitmustexamine whether thepractice might havebusiness justification
other thanreducing competition.31Presumably, innovation, broadly defined, would beonefactor
30Theconcept ofsuperior competitive performance isbroader thanefficiency. Itincludes efficiency and
encompasses all(legitimate) ways inwhich afirm’sperformance maysurpass thatofitscompetitors. Asyet,
thisprovision hasnotbeen interpreted bytheTribunal.
31SeeNeilsen ,supra ,note19WT/WGTCP/W/51
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accounting for"superior competitive performance". Incases which havecome before theTribunal
sofar,impact oninnovation hasnotbeenaprimary issue.
TheActprohibits mergers thatarelikely toleadtoasubstantial lessening orprevention of
competition intheaffected markets. However, evenifamerger islikely toenhance ormaintain market
power, thelawcontains twoexceptions thatmaybelinked toR&D anditsimpact ongrowth. Among
thefactors listed intheActwhich theTribunal mayconsider indetermining whether amerger does
indeed substantially prevent orlessen competition is"thenature andextent ofchange andinnovation
inarelevant market". Change andinnovation cover anumber ofconsiderations other thanR&D.
However, themerger enforcement guidelines statethatthisencompasses theextent towhich atransaction
mayhinder significant R&D initiatives.32This, inturn, implies thatrelevant markets mayinclude
future-generation, inaddition tocurrent-generation, goods. Onewayinwhich R&D sometimes enters
merger analysis isasabarrier toentry. Assuch, itmaybeanti-competitive orpro-competitive. It
canrepresent asunkcostandconstitute abarrier toentry, orbealikely source ofentry.33
Thesecond exception isonegranted tojointventures. Ajointventure maybepro-competitive
solongasitislimited towhat isnecessary fortheproject tobeeffected, andtheventure involves
nochange incontrol ofanyparty. Efficiency isnotexplicitly atissue here, butthese requirements
suggest astructural approach tothetrade-off between theeconomic impact ofR&D andcompetition.
Thisissue hasnotyetbeenargued before theTribunal.
4.2 Intellectual Property Rights (IPRs)
Thecompetition policy perspective ofIPRshasevolved considerably overthepasttwenty years
tothepoint where IPRs arenowconsidered asanother form ofproperty rights, serving useful,
pro-competitive functions inamarket economy. Thisnewcompetition policy perspective isbased
on:(1)agreater appreciation ofthedynamic aspects ofcompetition relating toinnovation andadaptation
ofnewtechnology34;(2)animproved understanding oftheeconomic implications ofassociated trade
practices suchastiedselling, field-of-use restrictions andother vertical restraints; and(3)therole
32Intheproposed purchase byInstitut Merieux ofCDC LifeSciences, theBureau explicitly cited theimpact
onR&Dinseeking anorder from theTribunal tosuspend thetransaction pending aninvestigation. Thetwo
firmswereamongthemostimportantcompetitorsinahighlyconcentratedindustry,thesaleandsupplyofvaccines,
aswellasR&Dfornewandimproved vaccines. Thisindustry requires substantial capital expenditures and
longleadtimes forproduct development and,duetoconstant product improvement andupdating, secrecy of
proprietaryinformationisessentialtocompetition.Thedealwasrestructuredinamannerthatraisednosubsequent
concern.
33Inarecent decision bytheDirector nottochallenge anacquisition inthemanufacture andsaleofmetal
vacuum closures andrelated packaging equipment, afactor inthedecision wasthattheparties agreed toenter
intoanamendmentoftheLicensingAgreemen tinwhichtheCrownagreedtodisposeofcertainintellectualproperty
rights. Please see"Competition Bureau Allows Manufacturing Companies ofMetal Vacuum Closures toMerge"
CompetitionCommuniquévol3no.1,1997.Onanothermerger,specificmentionwasmadeofintellectualproperty
rights inadivestiture order defining assets sothattheywould include relevant trader marks andtrade names.
Please seeDirector ofInvestigation andResearch v.Southam Inc.et.al.(8March 1993) Order Regarding
Divestiture CT-90/1 (Comp. Trib.). Under definitions atpage 4itstates: "North Shore News business" ...For
greatercertainty,theassetsusedinornecessarytothebusinessinclude,butarenotlimitedtothefollowing:(a)the
North Shore News trade mark andtrade name andallother trade marks used inthebusiness.
34Seegenerally, F.M. Scherer, Industrial Market Structure andEconomic Performance (Boston: Houghton
Mifflin Company, 1980, second edition), ch.15andreferences cited thereinWT/WGTCP/W/51
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ofIPRs(likeotherpropertyrights)infosteringinventiveactivityandinfacilitatingefficienttransactions.35
From astaticorshort-run perspective, thereisacertain tension between thegoalsofcompetition
policy andIPRs. Indeed, while IPRsmayprovide alimited form of"statutory monopoly", therole
ofcompetition lawistoprovide remedies todealwithlicensing andother practices thatunreasonably
limitcompetition tothedetriment ofusers. Thisisimportant particularly incircumstances where IPRs
confer significant market power ontheowners.
Inthemajority ofcases, however, IPRsdonotprovide significant market power, atleastto
adegree thatraises competition concerns. Rather, theproduct space covered byaparticular IPRis
usually smaller thanarelevant market inacompetition policy sense.36More fundamentally, inthe
longrunIPRs generally strengthen competition intheeconomy byproviding incentives forthe
development andproduction ofnewproducts andproduction processes. Thus, thelongrungoals of
competition andIPRs aremutually reinforcing.
4.3 Thetreatment ofintellectual property rights under theAct37
Ingeneral, theActprovides aflexible, market-oriented framework fordealing withbusiness
arrangements andpractices relating toIPRs. TheActprovides remedies todealwithawide range
ofanti-competitive practices thatmayoccur inthecontext oflicensing andother arrangements. At
thesametime, therelevant statutory provisions incorporate appropriate filters thatfocus theprovisions
onsituations involving significant market power andfacilitate consideration ofpotential efficiency
justifications forparticular practices.
TheAct'sprovision covering abuse ofdominant position contains alimited exception forthe
legitimate exercise ofIPRs. Thisexception, found insubsection 79(5), stipulates thatactsthatare
engaged in"pursuant onlytotheexercise ofanyrightortheenjoyment ofanyinterest" derived under
intellectual property statutes donotconstitute anti-competitive actsforthepurposes oftheabuse
provisions.38Thisexception doesnotprovide ablanket exemption forintellectual property holders
35J.P.McGrath,"PatentLicensing:AFreshLookatAntitrustPrinciplesinChangingEconomicEnvironment",
Patent andTrademark Review ,vol.82,no.9,September 1984, pp.355-365
36Ibid.
37Thefollowing section draws onR.D. Anderson, S.D.Khosla andM.F. Ronayne, "The Competition Policy
Treatment ofIntellectual Property Rights inCanada: Retrospect andProspect", inR.S. Khemani and
W.T. Stanbury (eds.), "Canadian Competition LawandPolicy attheCentenary" (Montreal: TheInstitute for
Research andPublic Policy, 1991); andG.N. Addy, "Competition Policy andIntellectual Property Rights:
ComplementaryFramew orkPoliciesforaDynamicMarketEconomy",anaddresstotheXXXVIthWorldCongress
oftheAIPPI, 29June 1995, Montreal.
38PleaseseeDirectorofInvestigationandResearchv.Tele-Direct(Publications)Inc.andTele-Direct(Services)
Inc.(26February 1997) CT-94/3(Comp. Trib.). Inthiscase, theDirector argued thattheselective refusal
tolicence trademarks suchasthewords “Yellow Pages ”andthewalking fingers logotocompeting suppliers
ofadvertising, constituted anti-competitive actsunder section 79oftheCompetition Act.TheTribunal ruled
thatthiswasnotananti-competitive actandthisrefusal merely represented partofthestatutory rights ofa
trademark holder infurtherance ofmaintaining thegoodwill associated withthemark. TheTribunal deemed
thisactdistinguishable from asituation where anti-competitive provisions areattached totrademark licensing.
Since theTribunal didnotprovide extensive analysis inthisdecision about what activities would beconsidered
tofallwithin section 79(5) (i.e.those strictly within theexercise ofanintellectual property right which would
(continued...)WT/WGTCP/W/51
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fromtheapplication oftheabuse provisions. Theprovisions oftheActremain applicable totheabuse
ofIPRs, asopposed tothemere exercise ofsuchrights.39
Section 32oftheActpermits theFederal Court ofCanada, onapplication bythe
Attorney-General, toissueorders providing forvarious remedial measures respecting abuse ofpatents,
copyrights, trademarks orregistered industrial designs.40Itshould benoted thatremedial measures
underthissectionarecontingentuponsatisfyingtheCourtthatthepracticesinquestionhavehad"undue"
anti-competitive effects andthatsuchmeasures donotviolate Canada 'sinternational obligations with
respect totheprotection ofintellectual property.41
Section 61oftheAct,creating acriminal offence ofprice maintenance, refers specifically to
exclusiverightsandprivilegesconferredbypatents,trademarks,copyrights,registeredindustrialdesigns
andregistered integrated circuit topographies asameans toenforce price maintenance.
Inaddition, several othersections oftheActthatdonotreferspecifically toIPRsarenevertheless
applicable toabusive practices relating tosuchrights (e.g., restrictive licensing practices). Forexample,
section 77deals specifically withthepractices oftiedselling, exclusive dealing andterritorial market
restriction. Itshould beemphasized thatthelatterpractices arenotperseoffenses under thelegislation.
Rather, theyarereviewable matters thataredealt withonacase-by-case basis. Theintent ofthe
legislation istoprovide remedies fordealing withthese practices onlywhere theyarelikely toresult
inasubstantial lessening ofcompetition andmeetother statutory conditions.
Finally, sections 85to90provide forthenon-application ofsection 77(inrespect ofexclusive
dealing)andsection45(criminalconspiracy)tospecializationagreements42thathavebeendulyregistered
withtheTribunal, where theymeettheapplicable statutory tests. Areference tointellectual property
38(...continued)
bebarred from review under theCompetition Act), itremains tobeseenwhat implications thisdecision will
haveforcompetition cases involving suchrights. Wedoknow from pastexperience thattheTribunal iswilling
toissue remedial orders involving intellectual property rights where itcanbeshown thatitwould assist in
addressing ananti-competitive act.
39Thefirstdecision oftheCompetition Tribunal under theabuse ofdominance provisions dealtwithanumber
ofissues relating totheroleofintellectual property rights inthesweetener industry. TheTribunal imposed
restrictions onthecontractual useofatrademark toforestall competitive entry. SeeCanada (Director of
Investigation andResearch) v.TheNutraSweet Co.(1990), 32C.P.R. (3d)1
40Theremedies available under section 32include orders: (1)declaring voidrestrictive provisions inlicensing
agreements; (2)restraining anypersons from carrying outsuchobjectionable conduct; (3)directing thegrant
oflicenses under apatent orcopyright or,ifthisisconsidered insufficient, revoking apatent; (4)requiring
thatatrademark beexpunged; and(5)mandating such other measures astheCourt considers necessary.
41Inthecontext ofacriminal conspiracy case, "undueness" hasbeen described bytheSupreme Court of
Canada asaserious orsignificant effect oncompetition asdetermined byanexamination oftwofactors. The
firstiswhether theparties have market power intherelevant market; thesecond requires adetermination as
towhether theparties 'behaviour hasbeen orwillbelikely toinjure competition. SeePANS, supra ,note8.
Theapplication ofthistestmaydiffer somewhat inthecontext ofacivilproceeding under theAct.
42Thepurpose ofthespecialization agreement provisions istofacilitate industrial restructuring andtohelp
Canadianfirmstocompeteeffectivelyininternationalmarkets.Forafullerdiscussion,seeDirectorofInvestigation
andResearch, Strategic Alliances under theCompetition Act(Information Bulletin, 23November 1995). The
preface totheBulletin observes that"itistheBureau 'sexperience thatmost forms ofstrategic alliances donot
raise issues under theCompetition Act"(p.1).WT/WGTCP/W/51
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iscontained insubsection 86(4) which authorizes theTribunal, inregistering specialization agreements,
tomake orders requiring thewider licensing ofpatents. Ineffect, therefore, subsection 86(4) makes
itpossible forfirms toavoid potential liability forcertain actions contained inspecialization agreements
byproviding forwider licensing ofpatents (among other competition-enhancing measures).
Thecompetition lawtreatment ofIPRs hasnotbeenextensively elaborated inCanada. In
particular, theimpact ofthelawonR&D, innovation and,ultimately, onfuture product markets has
notbeenacentral issueinanycasesbrought before thecourts ortheTribunal. Nevertheless, therelevant
provisions oftheActrecognize thattechnological innovation hassignificant welfare implications, that
competitive markets mayprovide sufficient incentives toinnovate andthatinnovation itself canact
asacatalyst forfurther competition.
Refusals todealundertaken forthepurpose ofpreventing persons fromimporting orexporting
products arepotentially subject tosection 75.Forinstance, arecent caseunder thissection dealtwith
refusal tosupply aCanadian exporter.43
5. TheInterface Between Competition Policy andTrade Policy
Trade liberalization andcompetition policy share broadly similar goals. Bothseektoensure
thatartificial barriers tothecompetitive process areremoved tothegreatest extent possible inorder
toencourage efficiency intheproduction andallocation ofgoods andservices. Onespecific goal-
market access -represents animportant confluence between tradeandcompetition policies. Measures
thatgenerally foster global contestability ofmarkets willbeconsistent withtheobjectives ofbothtrade
andcompetition policies.44
There isagrowing acceptance ofthelinkage between strong rivalry inthedomestic market,
supported byvigorous antitrust enforcement, andtherealization ofgains from trade liberalization
agreements. Domestic competition lawscomplement trade liberalization agreements byensuring that
thebenefits ofsuchagreements arenotnegated byprivate restraints totrade. Strong competition in
domestic markets alsohelps tosmooth thestructural adjustments which aretheinevitable result of
anytrade liberalization accord.45
Theclose relationship between competition policy andinternational trade isdirectly reflected
inseveral provisions oftheAct.Withtradeliberalization, Canadian competition authorities aregiving
greater weight totheability ofimports, andpossible entry byforeign investors, todiscipline thepricing
43SeeCanada (Director ofInvestigation andResearch) v.Chrysler Canada Ltd(1989), 27C.P.R. (3d)1
(Comp. Trib.) where theDirector sought anorder against Chrysler Canada requiring ittoaccept thecomplainant
asacustomer forChrysler brand autoparts onitsusual trade terms. SeealsoCanada (Director ofInvestigation
andResearch) v.Xerox [1990] 33C.P.R.(3d) 83where theDirector brought anapplication requesting thatXerox
supplythecomplainantwithXerox-brandcopierpartsforcertainmakes.Aswell,theCompetitionBureaurecently
filedanApplication withtheCompetition Tribunal against Warner Music Canada Ltd., based inScarborough
anditsU.S.affiliates,WEAInternationalInc.andWarnerMusicGroupbasedinNewYorkCity.TheApplication
hasbeen made pursuant tosection 75oftheCompetition Actasaresult ofrefusal bytheWarner companies
tosupply licences which could enable BMG Direct Ltd.("BMG") tomarket Warner compact discs andcassette
tapes inCanada through itsmailorder record club.
44SeeR.S.Khemani, "The Complementarity Relationship Between Trade Policy andCompetition Policy",
Symposium Paper No.10,prepared fortheOECD Trade Committee Symposium onRegulatory Reform and
International Market Openness, Paris, 9-10 July1996.
45SeeR.D. Anderson andS.D. Khosla, "Competition Policy asaDimension ofEconomic Policy: A
Comparative Perspective", Occasional Paper No.7,Competition Bureau, Industry Canada, 1995WT/WGTCP/W/51
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behaviour andothercommercial practices ofmerging parties aftertransactions, andofcompanies which
allegedly arepartofadomestic cartel. Thismethodological approach iscaptured inthemerger
provisions oftheAct,which listtheextent offoreign competition asaseparate factor tobeassessed
aftertherelevant market andmarket concentration havebeendetermined. Thisapproach wasapplied
bytheTribunal inHillsdown where itfocused onpotential competition offered byUSfacilities which
were notyetstrongly active intheCanadian market.
Since theearly1980s, theDirector hasintervened asapartyinseveral casesbefore theCanadian
International Trade Tribunal anditspredecessors toaddress questions ofmaterial injury andpublic
interest. These interventions haveinvolved thefollowing industries: sugar, cars, fibreglass pipe
insulation, beer, footwear, surgical tapes andhome canning materials.
InCanada, theSpecial Import Measures Act46governs theapplication ofanti-dumping and
countervailing duties toimports ofdumped orsubsidized goods thatarefound tocause injury todomestic
producers. TheCompetition Bureau hasalsoplayed animportant roleinthereform ofanti-dumping
andcountervailpolicyinCanada.Mostrecently,theCompetitionBureaumadeanumberofsubmissions
andanappearance before aspecial House ofCommons 'Committee examining theSpecial Import
MeasuresAct47.TheCommittees'Report48and,mostrecently,thegovernment'sresponsetotheReport,49
adopted asignificant number oftheBureau ’sproposals.
Competition policy hasalsobeenaddressed inanumber ofregional freetrade agreements.
IntheNorth American FreeTrade Agreement (NAFTA) there isanexplicit inclusion ofcompetition
law;Chapter 15reflects acommitment inprinciple tomaintain andenforce national competition laws
andtopromote effective competition lawenforcement intheNorth American freetrade area. Inthe
Canada-ChileFreeTradeAgreement,thepartiesagreedtoincorporatesimilarlanguagetothatofNAFTA
oncompetition.
6. International Cooperation
Investment andtradeliberalization hasaccelerated theintegration ofeconomies, substantially
increasing thelevelofcross-border trade, investment andtheexchange oftechnology. The"nationality"
ofcorporations hasbecome moredifficult toascertain inthewakeoffar-reaching investment andcapital
market liberalization. Hence, therelative economic importance forthehostcountry ofnational versus
foreign firms ismuch lessclear-cut thaninthepast.
Globalization andtheemergence oflarge, "stateless" corporations areplacing newpressures
ontheinternational antitrust system. These pressures takemany forms:
46Special Import Measures Act,R.S.C. 1985, c.S-15
47SeeSubmission oftheCompetition Bureau, Industry Canada, totheSub-Committee ontheReview ofthe
Special Import Measures ActoftheStanding Committee onFinance andtheSub-Committee onTrade Disputes
oftheStanding Committee onForeign Affairs andInternational Trade, regarding aCallforComments concerning
theReview oftheSpecial Import Measures Act,20November 1996.
48TheReports oftheSub-Committee were tabled intheHouse ofCommons on11December 1996. See
http://www.parl.gc.ca
49TheGovernment Response totheReport ontheSpecial Import Measures Actwastabled intheHouse of
Commons on18April 1997, bytheMinister ofFinance, theHonourable PaulMartin. SeeFinance Canada 's
Internet Web site:http://www.fin.gc.caWT/WGTCP/W/51
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transnational mergers andacquisitions which arereviewed byseveral antitrust
jurisdictions;
international strategic alliances;
cross-border corporate linksandotherforms ofinternational cooperative arrangements;
and
internationalcartels,whicharesometimesfacilitatedbytrademeasuressuchasvoluntary
export restraints.
These pressures havebrought theinternational elements ofantitrust matters totheforefront.
While theneedtoprotect competition within anation 'sboundaries hasretained itsimportance, the
impact ofcompetition policy enforcement increasingly cutsacross borders, asmarkets become more
andmore international.
International cooperation ispartofCanada 'scomprehensive approach toamodern, effective
andrelevant competition policy. Canada hasbeenattheforefront ofgreater cooperation withitstrading
partners intheenforcement ofantitrust law.The1995Canada-US Agreement Regarding theApplication
oftheirCompetition andDeceptive Marketing Practices Laws andtheMutual Legal Assistance Treaty50
(hereafter "MLAT") between Canada andtheUSfacilitate aclose degree ofcooperation between
Canadian andUScompetition lawenforcement agencies where warranted.51
CooperativemechanismsavailableundertheMLATenabledtheBureauandtheAntitrustDivision
oftheUSDepartmentofJusticetoundertakeajointinvestigationandsecureconvictionsinbothcountries
against fourforeign suppliers whowerepartytoaninternational conspiracy involving thermal faxpaper.
In1994, Kanzaki Specialty Papers Inc.pleaded guilty ofhaving conspired tolessen competition in
Canada. Mitsubishi Corporation anditsCanadian subsidiary Mitsubishi Canada Limited alsopleaded
guilty ofhaving conspired tolessen competition aswellasprice maintenance activities inCanada.
Following onfurther investigation inCanada andtheUnited States, guilty pleas, finesandprohibition
orders werealsoobtained against Rittenhouse Ribbons andRolls Ltd., NewOjiPaper Company Ltd.,
andMitsubishi Paper Mills. Fines inCanada inthefaxpaper matter havetotalled Can$3.45 million
sofar.52
Theductile ironpipecaseisalsoanexcellent example ofjointwork. Thecaseinvolved a
conspiracy tohaveaUSpipemanufacturer exittheCanadian market. Open discussions andexchanges
ofinformation between theCompetition Bureau andtheUSDepartment ofJustice helped todetermine
thatthemain effects oftheconspiracy were inCanada, andincollecting arecord fineinCanada of
Can$2.5 million.53
Amore recent example ofCanada-US cooperation istheestablishment ofataskforce oncross
borderdeceptivemarketingpracticeswiththeintentionofprovidingaframeworktopromotecooperation
50Implemented bytheMutual Legal Assistance inCriminal Matters Act,R.S.C. 1985, c.M-136
51Canada isinthefinal stages ofnegotiating anagreement withtheEuropean Union along similar lines.
52SeeCanadav.KanzakiSpecialtyPaperInc.(1994),82F.T.R.63,56C.P.R.(3d)467;Canadav.Mitsubishi
Canada Ltd.andMitsubishi Corp. ,Federal Court ofCanada T-1825-94, August 8,1994 (unreported); Canada
v.Rittenhouse Ribbons andRolls Ltd.,Federal Court ofCanada T-2663-95 December 20,1995 (unreported);
Canada v.NewOjiPaper Co.Ltd.,Federal Court ofCanada T-1693-96, August 16,1996 (unreported)
53SeeR.v.Canada Pipe Co.(1995), 101F.T.R. 211, 64C.P.R. (3rd) 182(T.D.)WT/WGTCP/W/51
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between lawenforcement agencies inCanada andtheUSonthisissue. Withglobalization ofbusiness
activity andadvances intechnology, thereisgreater potential fortransborder activity inthisarea,thereby
making aproactive andcooperative approach toenforcement increasingly necessary.
Inaregional context, NAFTA contains certain provisions pertaining totheenforcement of
competition law. Chapter 15calls ontheparties toadopt andmaintain measures toproscribe
anti-competitive conduct andtocooperate onissues ofcompetition lawenforcement policy, including
mutuallegalassistance,notification,consultationandexchangeofinformationrelatingtotheenforcement
ofcompetition lawsandpolicies intheNAFTA area.
Canadabelievesinincreasingcooperationamongantitrustagencies.Asustainedanddetermined
effort tocooperate intheenforcement ofexisting lawsoverthenextfewyears willhelptopromote
alevelofcompatibility among thebasicobjectives andrulesassociated withcompetition, under which
domestic andforeign business enterprises willoperate, without compromising anation 'sfundamental
righttoregulate initsownterritory. Inthelongterm, greater consistency andcoherence ofcompetition
lawsandpractices across jurisdictions willassist inminimizing thefriction thatmayarisefrom the
extraterritorial impact ofantitrust enforcement.
7. Conclusion
TheCompetition Acthasenabled theCanadian government toopenuptheeconomy togreater
competition andfacilitated thestructural adjustment ofCanadian industry necessitated byglobal change.
TheActexpressly recognizes theroleofforeign competition andtheobjective ofenhancing Canadian
competitiveness. Ithasfostered stronger competition andmore intense rivalry intheCanadian
market-place, making Canadian companies more efficient andbetter abletocompete abroad. Inthe
longrun,anopen, competitive environment willserve topromote productivity growth andarising
standard ofliving.
Theexperience todatewithrespect totheenforcement oftheActsupports theobjectives of
Canadian competition policy asstated intheAct'spurpose clause. Thecases brought bytheDirector
andthejurisprudence developed indicate howflexible andbalanced theActisindealing with
anti-competitive abuses bydominant firms. The"total welfare" approach ingeneral, andwithrespect
tomerger analysis inparticular, isanexample oftheforward-looking, flexible approach tomerger
analysis needed forasmall, openeconomy.
Intheglobal economy, antitrust andcompetition authorities aregoing tobepursuing more
andmore caseswhere cooperation andcoordination willbenecessary toensure healthy andcompetitive
markets. Thechallenge toantitrust enforcement inaglobal market-place willbetosecure greater
cooperation intheenforcement ofcompetition policy.