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Abuse of Dominance
If you’re a small business...
Although it might look like these provisions are relevant only to dominant firms, it’s important for businesses of all sizes to be aware of the law. Often, other businesses are victims of abusive tactics. If you take the time to understand these provisions, it’ll help you identify potentially abusive tactics and notify us.
The Act also enables private parties to apply directly to the Competition Tribunal if they are directly and substantially affected by some kinds of abusive or restrictive conduct. For more information, please see our portal on private access to Competition Tribunal.
The Competition Act has specific rules for what are called dominant entities. An organization is a dominant entity when it has a substantial degree of market power. In other words, the organization’s position means that it has the ability to set prices above competitive levels or to influence other factors, such as product quality, to reduce competitive levels. A powerful firm could block competition and distort markets.
The Act says that a dominant entity can’t abuse its dominance by using its market power in a way that hurts competitors or competition.
At the Competition Bureau, we can investigate the conduct of a dominant entity to see if it abused its dominance. For more information, please see our page on Abuse of dominance.
Other restrictive trade practices
The Act has provisions that cover other restrictive trade practices that organizations can’t carry out in certain cases if such practices harm competition. These provisions do not always require the firm engaging in the practices to be dominant. However, they do generally require that the firm has enough market power, or the practices to be widespread enough, to affect competition.
- Refusal to deal
- Refusing to sell to a willing customer, which prevents the customer from being able to obtain adequate supplies of a product, significantly harming that customer’s ability to do business
For more information, see our guidance on refusal to deal
- Price maintenance
- Suppliers trying to control retail price of a product through different methods, including increasing prices, discouraging reduction in price and refusal to supply
For more information, see our guidance on price maintenance
- Exclusive dealing
- Supplier requiring or inducing a customer to deal mainly or only with them, or with someone they choose
For more information, see our guidance on exclusive dealing
- Tied selling
- Supplier requiring or inducing a customer to buy a second product
- Tied selling may also prevent a customer from using or distributing another product with a product supplied by a vendor
- Market restriction
- Supplier requiring the customer to sell certain products in a defined market or penalizing the customer for selling outside a specific market
For more information, see our guidance on market restrictions
Reasons why compliance good for your business
Most businesses in Canada want to do the right thing and operate within the law. Companies with strong compliance programs are in the best position to do so.
A credible and effective compliance program minimizes the chances of risky behaviour or potentially illegal activity and its consequences.
It can help your organization:
- operate within the law
- keep marketing activities compliant
- understand the risks from industry events and interactions with third parties, such as partners, competitors, or trade associations
- reduce the risk of costly investigations and lawsuits that interfere with your operations
- avoid penalties for your business and jail time for your people
- avoid the consequences of being associated with criminal conduct and protect your reputation
- minimize your business’ exposure to class action lawsuits
- remain eligible to participate in federal public procurement
A credible and effective compliance program strengthens your business and your reputation.
It might help:
- your organization recruit and retain good talent
- your business compete fairly and with confidence
- your people spot when others in the market are not playing by the rules
- your organization meet its environmental, social and governance goals
A small reminder on what makes a compliance program credible and effective
Your compliance program needs to be credible and effective to truly help you.
To be credible, your program must at a minimum show your business’ genuine commitment to obeying the law and competing fairly.
To be effective, your program must inform all your people, and those acting for your organization, that compliance is important. It must inform them of their legal duties and your internal compliance measures. It should also give you the tools to prevent and detect misconduct.
Your program should be reasonably designed, implemented and enforced in the circumstances. This means that it addresses your organization’s risks within your resources and in light of your business activities.
If you’re a small business . . .
Compliance is important for all businesses, no matter their size, risk profile, industry or location of operation.
Credible and effective compliance programs don’t have to be costly or complicated. They’re not only for large organizations. If your business is small or medium-sized, you need to make sure that management is committed to doing the right thing. Even simple steps can ensure that your compliance program runs effectively.
There are many benefits to having a credible and effective compliance program. Here are just a few examples:
- You stand a better chance of doing business with larger companies. They generally have compliance programs in place. They’ll probably be more comfortable working with you if you do too. Some might even require their suppliers or partners to have a compliance program.
- If you want to sell your business, you’ll find it easier to attract potential buyers. Acquirers will look into your organization’s compliance history. A compliance program demonstrates that you take compliance seriously.
You should pay special attention to your business practices if you could be considered a leader in a market, or if you have some degree of market power. Talk to your compliance officer or legal counsel about how to address these competition law risks in your compliance program.
How to determine if you might be a victim of abusive tactics or restrictive trade practices
Is a major player, or group of players, in the market acting in a way that is:
- preventing you from entering the market?
- preventing you from expanding in the market?
- pushing you out of the market?
- penalizing you for any of your commercial activity?
- making you less competitive (for example, by preventing you from lowering your costs or offering better products, services or technology)?
- making it difficult for you to attract new customers (for example, because they are locked up in long-term contracts or face high costs to switch service providers)?
- harming competition through their power as major buyers of products or services?
This is a list of some behaviours that could fall into the category of abuse of dominance or other restrictive trade practices. Other types of conduct could also be considered an abusive or a restrictive practice that is covered by the law.
If you feel you are the victim of these types of practices, notify us. You should also consider consulting a lawyer to evaluate your legal options.
Let’s look at two hypothetical scenarios that compare a positive and a negative approach to compliance for abuse of dominance.
Homes-on-Rent started the business of an online marketplace for homestays and vacation rentals of homes in Canada in 2017. The platform enables homeowners (known as hosts) to rent their houses to users who wish to book a house (known as guests). Hosts are paid a percentage of the price at which they have chosen to rent the house.
It was the first company to offer such a service in the Canadian market. By 2020, the number of hosts and guests on the platform increased. Around this time, there were rumours that some American companies were looking to enter the Canadian market with their own home rental platforms.
To solidify its market position, Homes-on-Rent considered introducing an exclusivity policy that said hosts couldn’t list the same homes on any competing platforms at the same time that they were listed on the Homes-on-Rent platform. The company would then monitor any violation of the exclusivity policy and take strict action against any misconduct by a host.
When Homes-on-Rent started operations, it had only a basic compliance program that did not address competition law risks.
Positive approach to compliance
Compliance program review
As its business grew, Homes-on-Rent started thinking seriously about competition law issues. It decided to adopt a comprehensive compliance policy in early 2020. It engaged an external compliance consultant on contract.
The consultant created a compliance program and regularly trained employees on acceptable business practices, especially by leading market players. She evaluated the compliance program annually and updated the board of directors on the effectiveness of the program.
Exclusivity policy is rejected
As Homes-on-Rent understood that it was a market leader, it decided not to adopt the exclusivity policy.
Due to the compliance measures taken by Homes-on-Rent, the company stayed on the right side of the law.
Negative approach to compliance
No compliance program review
Even as the business grew, Homes-on-Rent did not create a culture of compliance or a comprehensive compliance policy.
Exclusivity policy roll-out
The company adopted the exclusivity policy and aggressively enforced its application.
Market entry and expansion are stifled
By 2021, Homes-on-Rent became Canada’s largest online marketplace for homestays and vacation rentals of homes, with more guests and hosts than any other such platforms.
Homes-on-Rent’s competitors struggled to build viable businesses in Canada since they could not attract enough hosts due to the Homes-on-Rent exclusivity policy.
A new competitor tries to enter the market
TravelEazy is a medium-sized online travel company which commenced operations in 2018. It offers a platform where users can easily book tickets (for travel by air, rail or road) and hotels in Canada. In 2021, a year after Homes-on-Rent had issued its exclusivity policy, TravelEazy started marketing homestays on its own platforms, exploring the option of connecting hosts and guests directly.
However, despite trying for a year, TravelEazy was unable to attract many hosts to its platform as most of the hosts are bound by the Homes-on-Rent exclusivity policy.
Positive approach to compliance
Credible and effective compliance program
TravelEazy had a credible and effective compliance policy in place. It had a chief operations manager who also looks after the compliance function.
The company regularly conducted townhalls where sector specialists were invited to talk to employees on various topics including compliance. The employees were given checklists to identify anti-competitive market practices.
TravelEazy shared information with the Bureau
The business development team realized that they were being blocked from doing business with the hosts due to Homes-on-Rent’s exclusionary business practices. TravelEazy approached the Competition Bureau.
The Bureau investigated Homes-on-Rent
Homes-on-Rent received notice from the Bureau that it had begun an investigation. For the first time, Homes-on-Rent realized that its conduct is illegal under the Act. It lacked a credible and effective compliance program, and management had made no effort to communicate the importance of compliance.
The Bureau concluded that Homes-on-Rent had abused its dominant position. In a negotiated settlement, in addition to paying a fine, Homes-on-Rent had to design and implement a credible and effective compliance program.
The company also suffered reputational harm due to its conduct and paid significant legal expenses. It took a long time for the business to recover, and management had to devote more resources to create a viable compliance program and culture of compliance.
TravelEazy and other players encouraged increased competition in the market
The Bureau’s investigation into Homes-on-Rent’s conduct made guests and hosts aware of the exclusivity policy and that Homes-on-Rent had abused its dominant position.
TravelEazy and other players were able to reach out to many hosts. They quickly saw their platforms start to grow. Consumers had more choice in the market.
Negative approach to compliance
No comprehensive compliance program
TravelEazy chose to adopt a basic compliance program. It did not factor in competition law risks.
Its management and employees did not realize that Homes-on-Rent could be breaking the law by enforcing the exclusivity policy.
TravelEazy eventually chose to abandon its business plan of offering homestays on their platform.
TravelEazy exited the market
TravelEazy lost a potential business opportunity. Customers in the market lost the option of having a competitor to Homes-on-Rent in the market, which could have resulted in better services and lower prices.
The Bureau read news reports about TravelEazy abandoning its business plan. It also received complaints from some of the hosts. The Bureau decided to investigate Homes-on-Rent’s conduct.
How to contact us
For general inquiries: contact the Bureau
DISCLAIMER: Because every situation presents unique facts, the information set out herein is provided for general information only. This content is not a substitute for legal advice, nor is it a binding statement of the Commissioner of Competition’s position on the requirements or efficacy of any particular compliance program. Indeed, there is no one-size-fits-all approach when it comes to achieving credible and effective compliance.
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