Double Ticketing

Canadian competition law prohibits businesses putting two prices on one product and charging the higher of the two prices.

This concept of double ticketing was first introduced into Canadian law in 1975 to address stores listing two different prices for a single item; however, we are now seeing the concept being extended to today’s digital marketplace.

This trend commenced with the recent class action against Airbnb (2019 FC 1563) invoking section 54 of the Competition Act in the context of Airbnb showing a user one price for accommodation on the search results page, and a second, higher price that includes service fees on the listing page, then charging the customer for the higher price upon booking. This trend has continued with the B.C. Supreme Court recently certifying a class proceeding against an airline relating to its practice of charging passengers $25 to check their first bag (2021 BCSC 12).

Airline Class Action

The claim against the airline arises from inconsistent language in both its domestic and international tariffs with respect to whether or not passengers would be charged $25 to check their first piece of luggage. Both tariffs had provisions indicating that the first piece of checked luggage would be free of charge, and provisions indicating that there would be a fee on the first piece of luggage.

The plaintiff’s primary position was that because tariffs are published pursuant to government regulations, and form part of the contract with the passenger, they are continuously expressed to passengers.  The airline’s position was that because passengers can buy an airline ticket without ever looking at the tariff, the free check bag price was not clearly expressed, as required by the Competition Act, and that the plaintiff failed to plead that the two prices were expressed at the time of supply.

Initially, the Court found that the plaintiff had not pled that the two tickets were expressed at the time of travel, or even that they were expressed at the same time and permitted the plaintiff to amend its notice of civil claim to plead the temporal requirement. The defendants conceded that the plaintiff had adequately pled claims for breach of contract and unjust enrichment.

The Court subsequently certified the Competition Act claim (2021 BCSC 351), finding that the plaintiff’s proposed amendments addressed the issues it had previously raised with respect to timing.  In doing so, the Court rejected the defendants’ opposition to the amendments on the basis that the submissions effectively amounted to a request for the court to reconsider determinations it had already made on the basis of new arguments that were not made at the certification hearing.

The Court removed from the class individuals who flew on flights where the airline was not the entity that received the baggage fees.

The airline argued that commonality could not be established because the terms of its contracts with passengers differ depending on the circumstances surrounding each class member at the time of purchase. The Court rejected this argument and accepted the claim as a common issue. However, the court ordered a common issues trial on the basis that the tariffs were ambiguous insofar as they contain terms that contradict one another with respect to baggage fees, and thus needed to be properly construed.

The airline argued that because the determination of whether there was a juristic reason for enrichment would require an analysis of each individual contract, there could be no common issues in unjust enrichment. The Court rejected this argument, stating that the answer to this question will not differ between class members. The contract will either provide a juristic reason or not.

The Court found that the large number of claims, each for a small amount, made a class proceeding the only practical means of providing meaningful access to justice to the large number of individuals who may have a claim.

The airline raised the issue of double recovery due to a similar class proceeding in Saskatchewan with respect to baggage fees charged by it and another airline. Because that proceeding has not been certified, the Court found that any concerns about double recovery are mere speculation.

The Court found that the proposed representative plaintiff was suitable as she was subject to a contract of carriage with the airline during the class period and paid baggage fees for her first checked bag.

The Court therefore certified the plaintiff’s claims in relation to breach of contract and unjust enrichment and granted leave to the plaintiff to amend its notice of civil claim to plead the temporal requirement.

Unchartered Territory

There may be a growing trend of certifying cases applying double ticketing provisions to online sales, but it does not mean that these claims will succeed at trial. Indeed, in both the Airbnb case and the airline case, the courts expressed skepticism about the merits of the plaintiffs’ cases. Nonetheless, businesses putting two prices on a product or service to lure customers but then charging the higher price face potential class actions.

The Competition Bureau announced the 2021 transaction-size pre-merger notification threshold under the Competition Act is decreasing to C$93 million, effective February 13, 2021. Innovation, Science and Economic Development Canada also announced new, lower foreign investment review thresholds under the Investment Canada Act, effective January 1, 2021.

These thresholds are adjusted annually based on GDP formulas. As a consequence, they generally increase each year. This year’s decrease in merger review thresholds is a consequence of Canada’s economic contraction following from extensive restrictions on economic activity imposed by governments which were intended to slow the spread of COVID-19. If the economy recovers, it is likely these thresholds will increase in 2022.

Competition Act

In general terms, certain transactions that exceed prescribed thresholds under the Competition Act trigger a pre-merger notification filing requirement; such transactions cannot close until notice has been provided to the Commissioner of Competition (the “Commissioner”) and the statutory waiting period under the Competition Act has expired or has been terminated or waived by the Commissioner. Where both the “transaction-size” and “party-size” thresholds are exceeded, a transaction is considered “notifiable”. Continue Reading 2021 Merger Review Thresholds

Competition, marketing and foreign investment law saw a number of changes in the past year. Many of these changes were in response to the continuing COVID-19 pandemic, which has changed every aspect of how Canadians, businesses and government agencies operate. Despite the pandemic, the Competition Bureau (the “Bureau”) has actively continued its enforcement activity and provided a number of guidance documents to help businesses stay onside the Competition Act (the “Act”). Similarly, Canada’s Investment Review Division also had to respond to the challenges posed by the pandemic.

Below we discuss ten key themes seen in the competition, marketing and foreign investment law space this year, and discuss what the year ahead has in store. Continue Reading What 2020 tells us about 2021 and beyond: Fasken’s Year-End Review of the Top 10 Trends in Canadian Competition, Marketing & Foreign Investment Law

The use of long-term exclusive lease agreements by supermarkets in South Africa has been quite controversial over the last few years.  Unsurprisingly, the impact of long-term exclusive lease agreements on local competition was one of the six objectives to be investigated by the Grocery Retail Market Inquiry[1] (“GRMI”) which was established on 30 October 2015.

In the final report of the GRMI, which was published on 17 December 2019, it was recommended that the Competition Commission (“Commission”) must seek to secure voluntary compliance by the national supermarket chains of the recommendations made.  These recommendations included undertakings by supermarkets not to enforce exclusive provisions in certain instances, that new lease agreements may not contain exclusive provisions and that exclusive lease agreements must be phased out over a period of time. Continue Reading Reflecting on the phasing out of long-term exclusive lease provisions in South Africa

On Friday, the Foreign Investment Review Committee (“FIRC”) of the Canadian Bar Association’s (“CBA”) Competition Law Section met with representatives from the Investment Review Division (“IRD”), Innovation, Science and Economic Development Canada (“ISED”) and the Cultural Sector Investment Review (“CSIR”), Canadian Heritage. The meeting featured interesting and informative presentations from representatives from both the IRD and CSIR, followed by a Q&A. Outlined below are some of the highlights.

  1. Highlights from the IRD’s Presentation

(a) Net Benefit to Canada Review Threshold for UK Investors

The United Kingdom (“UK”), which has left the European Union (“EU”), and by extension the Canada-European Union Comprehensive Economic and Trade Agreement (“CETA”), is currently in a transition period which is set to end on December 31, 2020. During the transition period, UK investors have benefited from the net benefit to Canada review threshold available to trade agreement investors. As of January 1, 2021, investments into Canada by UK investors will be subject to the lower threshold for World Trade Organisation  (“WTO”) investors. Continue Reading Highlights from the Foreign Investment Review Committee’s Town Hall with the Investment Review Division and Cultural Sector Investment Review

The Canadian Competition Bureau (the “Bureau”) issued much welcomed guidance on Friday to confirm what many have said to date, namely that no-poaching,[1] wage-fixing[2] and other buy-side agreements fall outside the scope of the criminal conspiracy provision (section 45) of the Competition Act (the “Act”). This guidance comes in response to significant interest from politicians and the legal and business communities regarding the treatment of these types of agreements in light of the position taken by the US Justice Department’s Antitrust Division and the Federal Trade Commission (outlined below).

Section 45 of the Act prohibits agreements between competitors to fix prices, allocate markets or limit the supply of a product. Such agreements are per se unlawful (i.e. they are deemed illegal without proof of anticompetitive effects). Violations may be subject to significant fines, imprisonment and private enforcement (including class actions).

Section 45 of the Act was amended in 2009 to establish a per se criminal offence for “naked” restraints on competition, namely, agreements between competitors to fix prices, allocate markets/customers, or restrict output.  These types of agreements were prohibited on a per se basis (without any need to assess competitive impact) because they are viewed as inherently anti-competitive, without any prospect of pro-competitive effects.  The former provision required a competitive effects analysis and expressly covered, among other things, agreements between competitors to prevent or lessen competition unduly in the “purchase” of a product.  The amended per se criminal conspiracy provision omits any reference to agreements relating to the purchase of products.

Coincident with the amendments to the criminal conspiracy provision, a civil anti-competitive agreements provision – section 90.1 – was added to the Act.  Section 90.1 applies to agreements between competitors that are resulting in, or are likely to result in, a substantial lessening or prevention of competition. The Commissioner of Competition (the “Commissioner”) can seek to enforce this provision by way of application to the Competition Tribunal (the “Tribunal”).  The remedy for a breach of section 90.1 is a prohibition order. Civil damages are only available for breach of such an order.  In contrast, breach of section 45 can result in criminal sanctions in the form of fines and/or imprisonment, as well as civil actions for damages, including class action lawsuits.

In the initial period following the 2009 amendments to the Act, it was generally understood that the amended criminal conspiracy provision had no application to buy-side agreements, which may have pro-competitive effects. For instance, competitors can enter into buying group arrangements in order to lower their input costs, which could translate into lower prices for their customers. Consistent with this, the Bureau’s Competitor Collaboration Guidelines issued in 2009, state that section 45 applies to the price for the supply of a product, not for the purchase of a product.

The US Perspective

The US Justice Department’s Antitrust Division and the Federal Trade Commission have issued guidance indicating that naked no-poaching or wage-fixing agreements that are unrelated or unnecessary to a larger legitimate collaboration between employers will be criminally investigated and prosecuted as hardcore cartel conduct.

The Canadian Perspective

The Bureau has clarified that no poach, wage-fixing or other buy-side agreements will not be subject to criminal sanction due to the specific language in Canada’s cartel laws. Section 45 of the Act only applies to supply-side agreements due to the removal of the word “purchase” from section 45 of the Act in 2009. The Bureau reached this decision based on legal advice from the Department of Justice and the Public Prosecution Service of Canada that the removal of “purchase” from section 45 limited application of the provision to supply-side agreements.

However, the Bureau has indicated that it may assess buy-side agreements such as no-poach and wage-fixing agreements under section 90.1 of the Act, which authorizes the Tribunal, on application by the Commissioner to make prohibition orders in connection with agreements between competitors (including employers) that substantially lessen or prevent competition. The Bureau noted that it intends to provide further guidance on the treatment of buy-side agreements under section 90.1 in forthcoming updates to its Competitor Collaboration Guidelines.

As noted above, unlike section 45, violations of section 90.1 cannot result in fines, imprisonment, private enforcement or damages awards.

 

[1] A “no-poach agreement” is an agreement with another employer(s) not to solicit another company’s employees.

[2] A “wage fixing agreement” is an agreement with another employer(s) to limit wages, salaries or other employee benefits.

On November 11, 2020, the United Kingdom introduced the National Security and Investment Bill (NSI Bill) directed at improving its national security screening regime for investments.   With the introduction of the NSI Bill, the UK joins a long list of nations, including Canada, Australia and the United States, that have altered their national security investment screening processes and/or policies since the COVID-19 crisis started.

The NSI Bill contemplates:

  • mandatory pre-closing notification requirements for transactions involving specific listed industry sectors;
  • a voluntary notification process for transactions not involving a listed sector but which still may raise national security concerns; and
  • a “call in” power to screen transactions either not requiring notification or, where notification has been made, a decision is made within 30 business days of filing that a more detailed assessment is required.

Continue Reading New UK National Security Investment Screening Regime

The Canadian Bar Association’s Competition Law Section held its Fall Online Symposium last week (October 20-22). Dozens of panelists, both from the public and private sector, addressed a variety of  exciting issues connected to competition law and foreign investment enforcement in the time of COVID-19. Some of the highlights of the Symposium were the key note speech by Commissioner Boswell, the panels on failing firms, expedited proceedings and foreign investment, and the Virtual Cocktail Event hosted by the Young Lawyers Committee. A key takeaway from the conference was the ongoing effort by professionals on all sides of the competition bar to strike a balance between the rigorous and strong enforcement required to protect the Canadian economy, and the efficiency and flexibility needed to face business challenges caused by the COVID-19 pandemic.

Key Note Speech by Matthew Boswell, Commissioner of Competition

Commissioner Boswell’s key note speech was consistent with the Bureau’s messaging throughout the COVID-19 pandemic. The Commissioner’s view is that competition is not an obstacle to Canada’s economic recovery. Instead, he views competition as critical to maintaining the affordability of products and services. Conference participants heard about:

  • how competition is key to a resilient economy;
  • how the pandemic is creating increased opportunity for consolidation and other anticompetitive actions that would deepen the economic downturn and hinder recovery; and
  • that the way to achieve strong competition is through a strong and principled approach to compliance and enforcement.

The Commissioner remarked that while some may argue for industry specific regulation, the Bureau stands by its view that the best protection for the Canadian economy is healthy competition He also pointed to the Bureau offering some flexibility in recognition of these uncertain times by highlighting the Bureau’s recently published statement on competitor collaboration during COVID-19. (The utility of these guidelines, however, has received mixed reviews from the private bar, and as of yet no private parties have made use of the Bureau’s rapid response team, which was meant to provide additional informal advice in connection with these guidelines).

Failing Firms

As discussed in our Refresher on the Failing Firm Defence, one of the factors the Bureau considers when reviewing a merger is whether the business, or part of the business, of a party to the proposed merger has failed or is likely to fail. Known as the ‘failing firm defence’, the loss of the competitive influence of a failing firm is not attributed to a proposed merger where such competitive influence would have been eliminated in any event by way of the firm’s failure (i.e., the merger would not eliminate an effective competitor).

The panelists highlighted the issue of forecasting market conditions in the current unpredictable and unprecedented context of the COVID-19 pandemic as one of the primary difficulties that competition lawyers and regulators are grappling with when representing, or evaluating the submissions of, failing (or flailing) firms.

While it has historically been reasonable to look at current conditions as the best forecast of future conditions, that assumption no longer holds true. The panelists noted that not only are regulators faced with the challenge of modeling the impact of the failing firm’s exit from the market, but also with the added difficulty of modeling how the market is changing generally, apart from the specific transaction, which is a difficult task.

These difficulties, in the opinion of the panelists, apply just as much if not more in the case of flailing firm arguments, as in failing firm arguments.

Interestingly, the panelists noted that they have not yet seen an appreciable increase in assertions of the failing firm defence. However,  given the increase in insolvency filings, it may be that we will see this in the future. As noted by Commissioner Boswell in his key note speech, the Bureau also expects to see an increase in these transactions. In that speech, the Commissioner stated that the Bureau will maintain the normal rigour and framework for assessing failing firms, while appreciating the need to be timely.

Expedited Proceeding

A panel discussion on expediting litigation and the need for speed in challenging times, moderated by Antonio Di Domenico, looked at recent use of private arbitration in a U.S. antitrust merger dispute and the first application of an expedited proceeding before the Competition Tribunal in Canada.

The panelists discussed the many benefits of arbitration, including decreased delay. Further, panelists discussed how parties benefit from increased certainty in arbitration, as they will know when the decision is scheduled to be released by the arbitrator. Arbitration also has the benefit of providing better, and less procedurally difficult, protection of confidentiality, as the proceedings are closed to the public.

The panel also discussed the first, albeit unsuccessful, application in Canada to use an expedited proceeding process before the Competition Tribunal. The panelists highlighted that the expedited process will not be granted unless it is reasonable and advisable, in light of the circumstances of the case. Further, the parties must show that benefits are to be gained which justify adoption of the process.

The diverse panelists agreed that adoption of new tools and process that allow for increased efficiency through expedited processes would benefit all sides involved, caveated by the need to ensure a balance is struck with the requirements of procedural fairness.

National Security and Foreign Investment

The panelists, including Andrew House, discussed the enhanced scrutiny for reviews under the Investment Canada Act that had been introduced due to the COVID-19 pandemic, as well as the extended timelines for national security reviews.

The panelists discussed the purpose of this new enhanced scrutiny. In their view, it was likely due, at least in part, to a fear of distressed Canadian businesses being taken advantage of on the global market by opportunistic investors. That is, by investors such as state-owned enterprises who do not face the same risks and impacts caused by the COVID-19 pandemic as such enterprises are not as vulnerable to the state of the market.

The panelists noted certain strategies to cope with the delay and uncertainty caused by long and drawn out review processes, such as the timing of notifications, early discussions with regulators and risk allocation between the parties to the transaction. This discussion showed the difficult balance that must be struck between the business impact of such enhanced measures and the increased importance of these reviews for protecting Canadian businesses.

Canada’s Competition Bureau (the “Bureau”) recently signed a new competition enforcement agreement, the Multilateral Mutual Assistance and Cooperation Framework for Competition Authorities (“MMAC”), with competition authorities in the U.S., the U.K., Australia and New Zealand.  The MMAC is intended to improve the Bureau’s ability to cooperate with its counterparts in cross-border investigations, competition policy development, competition advocacy and outreach, inter-organizational training and on special projects.

The Bureau advances international enforcement cooperation and convergence in three general ways. The first is through bilateral and multilateral relationships.  The Bureau has developed an extensive network of cooperation relationships with competition agencies around the world. Many of these are based on bilateral and multilateral cooperation agreements (many in the form of a Memorandum of Understanding).   In addition to the MMAC, the Bureau currently has cooperation instruments relating to Canada’s competition and consumer protection laws with 15 foreign jurisdictions.  It is interesting to note that the MMAC is the first direct cooperation agreement with the U.K.’s Competition and Markets Authority.

Other legal tools, such as the U.S.-Canada Mutual Legal Assistance Treaty, have permitted the U.S. Department of Justice and the Bureau to conduct joint and parallel investigations into criminal price-fixing investigations.  So called ‘second generation MOUs’, along with reciprocal information gateway provisions (such as section 29 of the Competition Act, which deals with the treatment of confidential information in the Bureau’s possession), address the exchange of confidential information between Canada and other jurisdictions, such as Hong Kong and Japan.  The MMCA is a second generation MOU that will permit the reciprocal exchange of confidential information and cross-border evidence gathering between the signatories. Continue Reading Competition Bureau Continues to Promote International Cooperation in Enforcement – Enters into a cooperation agreement with Five Eyes Counterparts

The Canadian Competition Bureau (the “Bureau”) released some informative statistics summarizing the number and characteristics of merger reviews started and concluded by the Bureau’s Mergers Directorate in its 2019-2020 fiscal year (ending March 31, 2020). In past years, similar information was presented by the Bureau at the Mergers Roundtable hosted by the Canadian Bar Association’s Mergers Committee and the Mergers Directorate, which did not happen this year due to COVID-19.

Non-Notifiable Mergers

About a year ago, the Bureau expanded the role of its Merger Notification Unit, now referred to as the Merger Intelligence and Notification Unit, to include a broader focus on active intelligence gathering on non-notifiable merger transactions that may raise competition concerns. These efforts have borne fruit, with the Bureau identifying and reviewing a number of non-notifiable transactions where the parties would not have otherwise engaged with the Bureau prior to closing. In one instance, the Bureau became aware of a non-notifiable transaction, Evonik Industries AG’s acquisition of PeroxyChem Holding Company LLC, and entered into a consent agreement with the merging parties which required the divestiture of assets in British Columbia to remedy competition concerns.

Number of Annual filings and reviews

There has been a slight increase in merger filings and reviews over the past year, although not outside the normal range for the past 10 years. Set out below is a chart outlining the total number of merger filings by year for the past 10 years.

image: Competition Bureau Canada

Continue Reading Merger Review by the Canadian Competition Bureau in 2019-2020: Breaking down the Numbers