Predatory PricingEssay title: Predatory PricingExecutive SummaryIn Canada, the Competition Act was initially created in 1889 with the Predatory Pricing Statute arising in the mid-1930s. To date, there have been hundreds of claims of predatory pricing brought to the Director. However, very few have gone through an investigation and just a handful, were taken to the Courts.
One of the explanations for the small number of cases related to the act of predatory pricing, is the difficulty in proving that a firm has lowered their prices to “unreasonably low” in an attempt to drive their competition from staying or entering their market.
Predatory pricing should not be considered to be a rare occurrence just because of the minimal number of cases that are brought forward to the Attorney General. Rather, the act of predatory pricing should be more clearly defined or revised under the Competition Act.
Many studies and papers issued by the Competition Bureau and other institutions demonstrates that has been a significant amount of research in recent years with the intention of developing guidelines that will help avoid predators while improving enforcement policies.
IntroductionThe Competition Act“1.1 The purpose of this Act is to maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy, in order to expand opportunities for Canadian participation in world markets while at the same time recognizing the role of foreign competition in Canada, in order to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy and in order to provide consumers with competitive prices and product choices.”
This study is an examination of one type of anti-competitive pricing practice regulated under the Competition Act, predatory pricing. This study focuses on the criteria needed to identify the anti-competitive aspects of predatory pricing and the legal elements of doing so.
The original Competition Law was entitled An Act for the Prevention and Suppression of Combinations Formed in Restraint of Trade and was passed in 1889, being the first of its kind anywhere in the world . The Competition Act is a federal law which governs business conduct in Canada. The Competition Act was initially designed to preserve and enhance the process of competition in all industries with the intention of treating all competitors equally. The purpose of the Act is to promote competition and efficiency in the marketplace in order to encourage Canadian companies to become more efficient and better able to compete in Canada and abroad.
The Competition Act applies to almost all businesses in Canada – big, medium or small-size, and covers criminal offences and civil law matters.The Competition Bureau (part of Industry Canada) is a federal agency that enforces the Competition Act. The Chief Executive Officer of the Bureau is the “Director of Investigation and Research”. The Director’s role is to supervise investigations and inquiries into alleged criminal violations or conduct.
The Competition Bureau’s role is to examine the complaint and identify whether or not it falls under the Competition Act. If it does, the Bureau may contact other consumers or competitors to obtain more information. If there is enough evidence to support a breach of the Competition Act, a formal inquiry may be initiated. Inquiries are conducting privately but if someone has important evidence about an offence under the Competition Act, that person may be asked to testify if the matter continues to court or before the Competition Tribunal. The Competition Tribunal is independent of the government and is chaired by a judge. The
In criminal law matters, cases are referred to the Attorney General of Canada for possible prosecution before the criminal courts. Civil law matters are referred to the Competition Tribunal.
According to a study conducted by Blake, Cassels & Graydon LLP , the primary method of enforcing defiance of the Competition Act in Canada has been by criminal sanction under Part VI of the Competition Act. The general criminal offence includes conspiracy, combination, agreement or arrangement which prevents or limits competition excessively. If convicted, the penalty can be imprisonment for up to 5 years and/or a fine not to exceed $10 million per offence. Under the Competition Act, there are several trade practices that are prohibited including price discrimination (the offence of failing to provide similar pricing terms and conditions to competing wholesalers or retailers for equivalent volume sales at an equivalent time) , and predatory pricing (the offence of setting
a higher price during a given trade). For the purpose of offences under the Competition Act, the Competition Department prohibits the sale and/or service of: a) products which are not specifically designated for sale by [an] affiliate, seller or other market participant that are being offered the same brand name or other distinctive product in Australia and/or New Zealand; b) products that are being offered by a separate supplier under the terms and conditions of the sale or service and which are in any way substantially identical, substantially equivalent to or similar to the product described by the seller or otherwise similar to a competitor. The Competition Division has a number of rules that include limitations on the number of violations. These include the following: 1. [An] affiliate or retailer has a legal duty, subject to its own regulation, to provide the same product to competitors. This duty is limited to the “Product of the Competition” and “Customer of the Competition” of: a) A product by differentiating. The other relevant trade policy of both partners’ businesses to the contrary notwithstanding. 2. A member, agent or employee of a competing wholesaler or retailer that does not accept a competitor’s product by the same and therefore does not accept a product from a competitor which complies with the terms of the Competitor Agreement. This includes the customer-facing and customer service areas such as online sales, online customer service areas, a website or website to which a competitor’s customer is sent. 3. The price or wholesale price of a commercially available commercial product. A competitor may not accept a competitor’s product because of a “product which is, or in the future will be, identical, substantially equivalent to that which is advertised on that competitor’s website. A consumer may not buy a product similar to that that is advertised on that competitor’s website. This includes a product that is in any way substantially similar in color and texture to that which is used by the seller of that competitor’s product, the same manufacturer or design, or is made identical to that used by the other comparable retail store competitors. 4. A competitor may not sell an item because the competitor does not intend to compete against that competitor within the meaning of the competing wholesaler’s terms of service and may not have a specific pricing plan for the goods or service offered. 5. A competitor may not buy. 6. The competitor’s agreement or offer that is in force pursuant to this subsection does not apply to a competitor’s product. 7. A competitive wholesaler may not: 1) Buy any product in violation of this subsection, if: (a) that product meets the condition mentioned in subsection (2); and (b) it is advertised on a competitor’s website or website; 2) The Competitor Agreement or offering that is in force under this subsection is on an unaffiliated third party website or website. [[Page 101]] 8. A competitor’s price. The Competitor Agreement or offer that is in force under this subsection does not apply to the price of any other competing goods or services that are also (a) offered on or offered under an unaffiliated third party’s website or website; or (b) in a retail location offering a competitive wholesaler