Abuse of dominance occurs when a dominant business (or group of businesses) engages in activity that stops or substantially reduces competition in a market. These anti-competitive activities may be:
- predatory (incurring short-term losses to eliminate a competitor and gain future market power);
- exclusionary (trying to prevent a business from operating in a market);
- disciplinary (trying to punish a business); or
- intended to adversely affect competition (e.g., by making other companies want to compete less and denying consumers the benefit of competition)
The Competition Act contains specific provisions regarding these types of abuse of market power.
Note: Being a large or dominant business is not, by itself, a cause for concern under the Competition Act. For example, a business can become large by providing better products and services than its competitors.
Examples of potentially anti-competitive practices
Below are a few examples of activities that may contravene the Competition Act:
- Using long-term or exclusive contracts to stop customers from changing suppliers
- Using contracts that prevent commercial partners from giving more favourable terms to rivals
- Cutting off essential supplies to rival companies
- Selling products or services below cost to hurt or discipline a competitor
For an abuse of dominance case to be brought before the Competition Tribunal, the following criteria must be met:
- The firm engaging in the activities must be dominant, that is, it has a substantial degree of market power – the ability to set prices above competitive levels or reduce other factors, such as product quality, below competitive levels.
- And one of the following must be true:
- The dominant firm’s activities are intended to have a negative predatory, exclusionary, or disciplinary impact on a competitor, or to have an adverse effect on competition.
- The dominant firm’s activities have substantially reduced the overall level of competition in the market or are likely to do so.
Note: A substantial lessening or prevention of competition can be seen through higher prices or a reduction in quality or innovation. Sometimes a competitor may be harmed, but not competition overall. Additionally, the above criteria can apply to a single firm or to a group of companies.
Remedies for non-compliance
When a company is found to be misusing its market power we will usually try to obtain voluntary compliance with the law. If all parties agree on a solution to restore competition to the marketplace, a formal consent agreement is then registered with the Competition Tribunal.
Consent agreements, which have the force of a court order, are inexpensive and quicker alternatives to litigation. They enable us to resolve concerns in a timely and efficient manner while ensuring compliance with the Competition Act.
If voluntary compliance cannot be achieved, we may file an application before the Tribunal for an order to remedy the situation.
When a company is found to have violated the abuse of dominance provisions of the Act, the Tribunal has a number of remedies at its disposal depending on the circumstances. The most common remedy is to issue an order that requires the company to either stop the anti competitive conduct or to take specific measures to overcome the effects of the conduct.
The Tribunal may also impose a monetary penalty. This can be for any amount up to the greater of:
- $25 million for the first violation and up to $35 million for any subsequent violation; or
- three times the value of the benefit derived from the anti-competitive practice, or, if that amount cannot be reasonably determined, 3% of the company’s annual worldwide gross revenues.
The Competition Act also allows private parties (individuals or corporations) to ask the Tribunal for a remedying order if they are directly and substantially affected by another company’s abuse of dominance. The process for filing a private party application is set out in the Competition Tribunal Rules, section 115.
About the Competition Tribunal
The Competition Tribunal is a quasi-judicial body that has the power to hear and dispose of matters involving non compliance with various sections of the Competition Act.
All Tribunal hearings are open to the public; however, due to sensitive or confidential testimony, a hearing may occasionally be held “in camera,” during which members of the public are excluded. An appeal of any Tribunal decision may be filed with the Federal Court of Appeal.
How to ensure compliance with the law
If you are unsure about what complying with the Competition Act means for your business, we recommend that you seek legal advice.
You can protect your business by having an effective compliance program in place. This will help your company comply with the law and it could reduce the risks associated with non-compliance. Like an early-warning system, a compliance program can help you detect and correct unlawful conduct quickly before it damages your company, your reputation, and your bottom line.
We also facilitate compliance by providing written opinions, which are subject to fees. These provide businesses with an opinion regarding proposed activities or conduct. Written opinions are binding if all material facts have been submitted, are accurate, and remain substantially unchanged.