Law Times

PAGE 10 FOCUS OctOber 20, 2008 • Law times t could be that there has been a consensus on how to enforce predatory pricing in a context that it will provide for effective enforcement. This past summer, the Compe- tition Bureau released its predato- ry pricing enforcement guidelines that provide for civil remedies against a company that uses pred- atory pricing intent on achiev- ing a position of dominance and eliminating competition. The initiative replaces the long-standing practice of pursu- ing predatory pricing allegations through the criminal courts, which has long been ineffective. "They have been struggling for years with an outdated, antiquated criminal law provision," says Su- san Hutton, partner at Stikeman Predatory pricing switched to civil track I BY DARYL-LYNN CARLSON For Law Times Elliott LLP's competition law and international trade group in Otta- wa. "It hasn't been enforced effec- tively for decades, if ever." Predatory pricing as an of- fence is the practice of pricing a product below cost in order to eliminate competition. The new PPEG updates guidelines of 1992 and involved consultation with lawyers and business associations during the fall of 2007. It now would enable prosecution under statutory and civil provisions rather than under the Criminal Code, which will render it more effective. But as all federal legislation, PPEG will help ensure Canadi- an businesses and give the gen- eral public a better understand- ing of when pricing below cost could result in an investigation under the Competition Act. It includes three fundamen- tal policy changes. Predatory pric- ing will be investigated under the abuse of dominance provisions with the option to proceed under the Criminal Code when conduct is deemed to be egregious. The second change enables the the PPEG was put on hold after the government was dissolved for this fall's election, so they remain merely guidelines. Law- yers are optimistic the new guidelines will be introduced once federal governance resume. The Bureau intends new Price matching has been a long- standing concern particularly for airlines, which routinely initi- ate competitive prices in response to each other's advertised fares. Hutton lauds the chang- Bureau to use an average avoid- able cost as a standard, referring to costs that a business could have avoided had it chosen not to sell its product in question. And it now acknowledges that "price matching" to meet a competitor's price point is a reasonable practice to foster lower prices for consumers. A comprehensive section-by-section analysis of Ontario's corporate law statute Annotated Ontario Business Corporations Act Stephen N. Adams, Q.C. This is the most complete and up-to-date resource available covering the broad range of issues essential to operating an incorporated Ontario company. Inside find comments on every section of the Act and find more than 300 annotated cases giving you insight into this area. This resource includes detailed annotated decisions under the oppression remedy provisions of the Act - an ever-expanding and increasingly important segment of corporate law. Featuring updated commentary, case law and cross-references to useful precedents, this is the only annotated OBCA that provides: annotations of every reported case under the Ontario Business Corporations Act and its predecessor Acts since 1970 commentary under each section of the Act with cross-references to other applicable sections of the OBCA as well as to the Canada Business Corporations Act and to O'Brien's Encyclopedia of Forms, Eleventh Edition, Division II – Corporations the latest changes to the legislation and case law through regular releases relevant unreported decisions the leading cases from other jurisdictions full text of R.R.O. 1990, Reg. 62, and O. Reg. 289/00 a comprehensive subject index to speed your research Also included are numerous amendments made to the OBCA proclaimed August 1, 2007, and the Securities Transfer Act, 2006! Act – is a valuable resource for all those wanting a practical approach to this important legislation Annotated Ontario Business Corporations Order your copy today! Hoffman-La Roche Ltd. was the first conviction for predatory pric- ing under the criminal provision. Drug maker Hoffman-La Roche Ltd. was the sole Canadian pro- ducer of tranquillizers Librium and Valium. In 1969, competi- tor, Frank Horner Ltd., entered the market under a compulso- ry drug patent licence. Hoffman- La Roche responded by, among other things, distributing Valium free to hospitals and governments, which was deemed a tactic to cap- ture the market and shut out its generic competitor. Michelle Lally, a partner at Os- www.canadalawbook.ca Adams_AOBCA_LT 1-4x3.indd 1 LT1020 ler Hoskin & Harcourt LLP's competition/antitrust law group, also welcomes the new guidelines. Osler lawyers worked closely with the Competition Bureau in developing the new PPEG by means of consultation and a formal submission. "Exactly how predatory pric- ing is enforced and what the appropriate measure of cost is have been somewhat controver- sial and until recently, subject to much debate," she says. 10/15/08 11:25:39 AM es as progressive. "It's necessary to show not only unreasonably low pricing but also that this will create, strengthen or en- hance a dominant position," she acknowledges. "The danger has been that if you over-enforce predatory pricing, you're go- ing to have a chilling effect on legitimate competitive pricing, which is good for consumers." She notes the new PPEG pro- vides for criminal sanctions in extreme cases that could extend to cartel activity. "They do re- serve the right to act criminally in extreme cases. If some mem- bers in an industry were involved in a cartel and they forced small- er members of the cartel to go along, the commission reserves the right to use criminal sanc- tions in extreme cases," she says. Hutton recently authored a 57-page paper examining preda- tory pricing in Canada and Eu- rope, both jurisdictions that have not had success with prosecu- tions under their respective laws. In the paper, she notes R. v. 'They have been struggling for years with an outdated, anti- quated criminal law provision,' says Susan Hutton. "I think there has now been consensus between the bar and the Bureau." Lally says the Bureau incor- porated most of the feedback it got from lawyers who will be in a better position to assist cli- ents concerned with competi- tor tactics; even those accused of predatory pricing. "Rather than have explic- it criminal offence on predato- ry pricing, it requires a complex analysis that is much more effec- tively dealt with under the civil reviewable abuse of dominance provision under the Act," she notes adding, "It is challenging to develop guidelines to distinguish between predatory pricing and aggressive pricing that is pro-com- petitive rather than anti-competi- tive. We don't want to chill head- to-head aggressive competition that lowers prices for consumers." She says under the new PPEG and its provision to take recourse under the civil reviewable abuse of dominance provision under the Act will only affect enterprises that have significant market power. "These guidelines now recog- nize the issue of market power," says Lally. "If other people start to price below cost for too long [they] will go out of business. These are firms with a market share of below 35 per cent gener- ally, these do not have the requi- site power" to assert dominance by means of predatory pricing. She adds most cases are probed by the bureau following com- plaints by a competitor within the market sector. LT WHAT CAN YOUR ONLINE RESEARCH SERVICE DO FOR YOU? CAN YOU ACCESS DOMESTIC AND INTERNATIONAL LEGAL RESOURCES WITH A SINGLE ONLINE PASSWORD? www.westlawecarswell.com/youcan Request a demo for a chance to win $2,500 in AMEX gift certificates Untitled-1 1 www.lawtimesnews.com YOU CAN. WestlaweCARSWELL gives you easy access to a world of unsurpassed legal information. With WestlaweCARSWELL, AUTHORITATIVE. INNOVATIVE. TRUSTED. 9/30/08 9:27:46 AM

• Cover
• Women In Law
• A Criminal Mind
• Focus On Business/Competition Law