Price maintenance may occur when a supplier prevents a customer from selling a product below a minimum price. It may also occur when a supplier refuses to supply a customer, or otherwise discriminates against them, because of their low pricing policy.
In some situations, price maintenance can increase competition. For example, price maintenance by a manufacturer could motivate retailers to offer expertise or services that help a product compete better against products from other manufacturers. Alternatively, price maintenance can decrease competition if it excludes rivals, prevents entry into a market, or limits competition in the marketplace.
Because of this, price maintenance is illegal only in certain circumstances. To be illegal under the price maintenance provision, it must have adversely affected competition in a market (or is likely to do so) AND one of the following is true:
- A supplier, by means of a threat, a promise or an agreement, influences upward, or discourages the reduction of, the prices charged or advertised by another business.
- A supplier refuses to supply a product to, or discriminates against, another person because of that other person’s low pricing policy.
- A person, as a condition of doing business with a supplier, induces that supplier to refuse to supply a product to another person because of that other person’s low pricing policy.
In some cases, price maintenance can also raise issues under other provisions of the Competition Act, such as the abuse of dominance provisions.
It is not usually a problem if a retailer sells a product or service based on the manufacturer’s suggested retail price (MSRP). However, if a supplier imposes and pressures a retailer to charge an MSRP, it may be illegal if it adversely impacts competition.
Remedies for non-compliance
Where appropriate, we will 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. For example, the Tribunal can order the non-compliant company to stop maintaining prices or to sell to the supplier it had previously refused to do business with.
The Competition Act also allows private parties (individuals or corporations) to ask the Tribunal for a remedying order if they are directly affected by a company that is engaging in price maintenance. The process for filing a private-party application is set out in the Competition Tribunal Rules, section 115.
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.