Annual Report of the Commissioner of Competition for the year ending March 31, 2004

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Appendix I - Discontinued Cases

On April 1, 2003, the Bureau discontinued an inquiry it had launched under paragraph 74.01(1)(a) of the Competition Act on February 21, 2002, following an application filed by six persons resident in Canada. The applicants alleged that a real estate developer had made materially false and misleading statements that affected its customers' purchasing decisions. Specifically, they claimed that the developer had repeatedly advertised that a condominium complex would be built with electronic security gates, but that these had not materialized. After investigating, the Bureau determined that the company remained committed to building the gates and that the delay resulted from a disagreement between the condominium board and owners about the gates' features, rather than from bad faith on the part of the company.

On April 1, 2003, the Bureau discontinued an inquiry it had launched on March 19, 2002, following an application filed by six persons resident in Canada. The applicants alleged that Nova Scotia automobile insurance companies had conspired to increase automobile insurance premiums and to discriminate against certain communities and age groups. The Bureau looked at this issue under section 45 (conspiracy) and section 49 (agreements or arrangements among federal financial institutions) of the Competition Act. The Bureau concluded that, while automobile insurance premiums had increased, there was no evidence that the companies had reached an agreement or arrangement to increase insurance premiums or to discriminate between communities and/or age groups.

On April 15, 2003, the Bureau discontinued an inquiry it had launched under section 61 (price maintenance) of the Competition Act concerning a complaint from a consumer electronics retailer. The retailer alleged that a supplier had discriminated against him and had ultimately refused to supply him because of his low-pricing policy. Following an investigation, the Bureau determined there was insufficient evidence to support the complainant's allegations.

On April 29, 2003, the Bureau discontinued an inquiry it had launched into the Quebec beer industry in August 2000 under section 77 (exclusive agreements) and section 79 (abuse of dominant position) of the Competition Act. Several Quebec microbreweries complained that they had suffered significant losses in product sales due to the business practices of Molson and Labatt, two major breweries. Specifically, the microbreweries criticized these breweries for exclusive dealing and for abusing their dominant position by engaging in various anti-competitive acts. Following an investigation, the Bureau determined that there was insufficient evidence to confirm that the breweries' practices substantially lessened competition. However, it noted that the beer industry, in which the two major breweries account for nearly 90 percent of sales and in which a number of clients are bound by potentially anti-competitive contract clauses, could still raise concerns under the Competition Act. Therefore, as the market evolves, the Bureau could decide to re-examine the industry and intervene, if necessary.

In April 2002, the Bureau received information concerning an alleged price-fixing agreement among building supply wholesalers in a local market in British Columbia. Following interviews with the wholesalers, Bureau officers concluded that insufficient evidence existed to show that competition had been lessened unduly, a requirement under section 45. Customers had relatively easy access to other sources of supply outside the local market, and the economic effect of such an agreement in this market would be small. Given these and other considerations, the Bureau elected to resolve the matter informally. In May 2003, Bureau officials met individually with the people alleged to have been parties to the agreement, reviewed the allegations and provided information on the relevant provision of the Competition Act.

On July 23, 2003, the Bureau discontinued an inquiry it had launched on February 7, 2003, under sub-section 52(1) (deceptive telemarketing) and sub-section 52.1(3) (deceptive representations) of the Competition Act, following complaints the Bureau received that a business opportunity start-up company and its representatives had engaged in misleading marketing and deceptive telemarketing concerning a vending machine business opportunity. During its investigation, the Bureau discovered that the Royal Canadian Mounted Police (RCMP) had already issued a warrant for the arrest of the company's director for his involvement in two previous business opportunity schemes. On February 24, 2003, Bureau officers and the RCMP executed a search warrant under the Criminal Code, uncovering enough evidence for the RCMP to lay additional charges concerning the scheme under investigation by the Bureau. The Bureau concluded it was not in the public interest to conduct a parallel investigation under the Competition Act.

In September 2003, the Bureau received a complaint concerning an alleged conspiracy to reduce competition and fix prices among certain members of a provincial association of agricultural drainage service companies. Following interviews and an analysis of the facts of the case, Bureau officers determined that insufficient evidence existed to show either undue lessening of competition under section 45 or resale price maintenance contrary to section 61 of the Competition Act. To educate the executive members of the association, Bureau officers attended a meeting in December 2003 and gave a presentation on the conspiracy and price maintenance provisions of the Act.

On September 22, 2003, the Bureau discontinued an inquiry it had begun on July 16, 2003, into certain pre-paid meal plan programs that allowed university students to eat at various restaurants and campus cafeterias. It had been alleged that the fees paid by off-campus restaurants were anti-competitive because small businesses could not afford them. The Bureau reviewed this matter under section 77 (exclusive dealing) and section 79 (abuse of dominant position) of the Competition Act. Because the number of students participating in this program was negligible compared to the overall population in the market and because there were no barriers to entry in the restaurant business, the Bureau did not find that competition would be substantially lessened.

On October 1, 2003, the Bureau discontinued an inquiry it had launched on August 27, 2001, under section 45 (conspiracy) of the Competition Act into allegations that a number of seafood processors in New Brunswick and Nova Scotia had conspired to fix the shore price paid to fish harvesters for snow crab caught in Nova Scotia in 2001. The Bureau found that the seafood processors did not possess sufficient control over the market to implement an agreement that would unduly lessen competition.

On October 24, 2003, the Bureau discontinued an inquiry it had launched on May 3, 2003, under section 45 (conspiracy) of the Competition Act into allegations that certain lobster processors had conspired to fix the price paid for lobster caught in and around Prince Edward Island between January 2001 and the spring of 2002. Following an investigation, the Bureau determined that there was insufficient evidence to support these allegations.

On December 2, 2003, the Bureau discontinued an inquiry it had launched on May 3, 2002, in response to allegations that a jewellery retailer had made false or misleading representations to the public about its prices for various articles of jewellery. It is contrary to sub-section 74.01(3) of the Competition Act for a seller to represent a price as the ordinary selling price when the seller has not sold a substantial volume of the product at that price or offered the product for sale at that price in good faith for a substantial period of time. This kind of advertising can influence consumers' purchasing decisions and lure them away from legitimate competitors. The company in question stopped these representations shortly after the Bureau made it aware of its concerns. The company also provided written assurance that all future marketing practices would comply with the Act. The Commissioner decided against pursuing this matter further, given the size and scope of the operation, among other things.

On January 8, 2004, the Bureau discontinued an inquiry that it had launched on August 1, 2002, under paragraph 74.01(1)(a) (misleading advertising) of the Competition Act, after receiving complaints that a major consumer electronics retailer had engaged in misleading marketing practices. The complaints alleged that the retailer did not adequately disclose the out-of-pocket costs to consumers for products for which rebates and/or credits were advertised; in many cases, prominently featured after-rebate prices proved to be artificial and impossible for consumers to obtain. During the course of its inquiry, the Bureau realized that the retailer had begun to prominently display relevant information to consumers, resulting in greater consumer awareness and fewer complaints. The Bureau decided it would not be in the public interest to continue the inquiry.

On January 8, 2004, the Bureau discontinued an inquiry it had initiated into complaints that a manufacturer of printers and copiers was using restrictive licensing terms to lessen and prevent competition in the relevant market. The Bureau reviewed the matter under section 79 (abuse of dominant position) of the Competition Act, finding that while some firms might have been affected by the restrictive licensing terms, they were a legitimate exercise of the company's copyright. Complaints were also made that the manufacturer was tying services to the sale of its products. Following its review under section 77 of the Act (tied selling), the Bureau determined that a tie could not be established. Since the requirements under sections 77 and 79 had not been met, the matter was closed.

On January 16, 2004, the Bureau discontinued an inquiry it had launched on June 28, 2001, under section 45 (conspiracy) of the Competition Act into the activities of a number of firms in the commercial tissue paper industry. Bureau officers determined that there was insufficient evidence for the Commissioner to refer the matter to the Attorney General of Canada for prosecution.

On February 27, 2004, the Bureau discontinued an inquiry it had launched in June 2003 into an alleged misuse of Canada's drug patent rules, following a complaint from the National Union of Public and General Employees and other national organizations representing seniors, pensioners, patient advocates and health care activists. These groups alleged that brand name pharmaceutical companies were engaging in a practice of "evergreening," whereby new patents are added to the patent register for a given medicine simply to delay generic versions from entering the Canadian market. The Bureau recognized that this process could delay the introduction of a generic drug, but concluded that the Act was not the appropriate vehicle for resolving what was essentially a patent dispute between two firms. From a competition policy perspective, however, the Bureau stated that the Government may wish to review the current rules to ensure that an appropriate balance is maintained between protecting intellectual property rights and facilitating a competitive supply of pharmaceutical products for Canadian consumers.

On March 3, 2004, the Bureau discontinued an inquiry it had launched on December 17, 2002, into game prize structures, under paragraph 50(1)(b) of the Competition Act. The Bureau was responding to a complaint by six persons resident in Canada that a major publisher, through 10 of its community newspapers, had engaged in regional price discrimination in the sale of advertising in a Quebec region. As part of its inquiry, the Bureau conducted a survey and held consultations with representatives of various community newspapers. It found that, while some firms were affected by the pricing strategy, sufficient competition remained in the market.

On March 5, 2004, the Bureau discontinued an inquiry it had launched in response to an application filed by six persons resident in Canada alleging that a real estate board had engaged in anti-competitive practices contrary to section 45 (conspiracy) and section 79 (abuse of dominant position) of the Competition Act. The inquiry failed to uncover evidence of a conspiracy under section 45. In addition, changes in the real estate board's conduct alleviated the potential for competition to be prevented or substantially lessened in the relevant market; therefore, grounds did not exist to pursue the matter.