Originally published in Blakes Bulletin on Competition, June 2007
On May 10, 2007, the Supreme Court of Canada denied Canada Pipe’s application for leave to appeal the Federal Court of Appeal’s decision in Commissioner of Competition v. Canada Pipe Company Ltd.
The Canada Pipe case began as a result of the company’s loyalty program – a preferential rebate program pursuant to which distributors obtained significant rebates and discounts in return for exclusively stocking Canada Pipe’s products.
The Commissioner brought an application before the Tribunal, alleging that the loyalty program contravened the abuse of dominance and exclusive dealing provisions of the Competition Act. While the Tribunal accepted the Commissioner’s argument that Canada Pipe was dominant, it concluded that the company’s conduct was neither anti-competitive nor likely to prevent or lessen competition substantially. The Tribunal found that Canada Pipe’s loyalty program was justified for business reasons and that there was no link between the program and any negative effect on competition. Indeed, the Tribunal found that there had been recent entry and competitive pricing in the relevant market. Consequently, the Tribunal dismissed the Commissioner’s application in its entirety.
The Commissioner appealed the ruling to the Federal Court of Appeal, which marked the first time that an appellate court had considered the abuse of dominance provision of the Act. The Court allowed the Commissioner’s appeal and remanded the case to the Tribunal for a rehearing. The Court found that the Tribunal had not applied the correct legal tests with respect to the application of the abuse of dominance provision. More specifically, it found that the Tribunal had misapplied the legal test with respect to the requirements of: i) an “anti-competitive act” and ii) “a substantial lessening of competition”.
On the first issue, the Court held that an anti-competitive act must have an intended negative effect on a competitor that is predatory, exclusionary, or disciplinary. On the second issue, the Court reformulated the substantial lessening of competition test to ask whether the relevant markets – in the past, present, or future – would be substantially more competitive ‘but for’ the impugned practice of anti-competitive acts.
It was this Federal Court of Appeal decision that Canada Pipe sought to appeal to the Supreme Court of Canada. The Supreme Court denied Canada Pipe’s application for leave to appeal the decision. The case will now be remanded to the Competition Tribunal for reconsideration in accordance with the legal tests set out by the Federal Court of Appeal.
The Federal Court of Appeal’s decision is available at: http://decisions.fca-caf.gc.ca/en/2006/2006fca233/2006fca233.html.
Should you have any questions with respect to the decision in the Canada Pipe case or any questions with respect to loyalty programs generally, please contact any member of the Blakes Competition Group
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