Annual Report of the Commissioner of Competition for the year ending March 31, 2003

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Preventing Anti-Competitive Activity

The Competition Bureau has a range of instruments at its disposal to respond to anti-competitive activity. Whenever possible, it works with companies to eliminate anti-competitive behaviour and encourage compliance with the law. However, when anti-competitive conduct prevails and there is evidence that a firm has violated criminal provisions of the Competition Act, the Bureau refers the case to the Attorney General of Canada and recommends prosecution. This can result in heavy fines, prison terms, or both, for offenders. In civil matters, when a solution cannot be reached by consent order or other means, the Bureau applies to the Competition Tribunal or the courts for a remedial order.

The following are examples of the Bureau's response to instances of non-conformity over the past year. For detailed information, including information notices, press releases and backgrounders on these cases and others, please visit the Bureau's Web site.

Airline Industry

The state of competition in the Canadian airline industry continues to be a matter of considerable public interest and concern. General economic conditions and other factors, including the aftermath of the events of September 11, 2001, negatively affected demand and revenues. Air Canada struggled with substantial operating losses and in the winter of 2003 was seeking bankruptcy protection under the Companies' Creditors Arrangement Act. Air Canada is not alone in facing these types of problems. Several other full-service network carriers in the United States and elsewhere were also restructuring their operations in light of changing consumer demand and competition from low-cost carriers.

On the more positive side, WestJet continued with its expansion eastward, including service at Toronto's Pearson Airport. In addition, two other low-cost carriers, CanJet based in Halifax, and Jetsgo based in Montréal, began service. During the year, Air Canada withdrew service from a number of smaller, unprofitable routes. This created some opportunity for small regional carriers to serve the affected communities.

As the fiscal year came to a close, there was considerable uncertainty about the future impact on the market of Air Canada's restructuring and the overall climate for air transportation. Against this backdrop, the Bureau continued to treat competition in the airline industry as a priority.

Competition Tribunal Hearing: Commissioner of Competition v. Air Canada

In March 2001, the Commissioner filed an application against Air Canada with the Competition Tribunal. The application arose as the result of investigations into Air Canada's response to WestJet's expansion into eastern Canada and CanJet's entry into the market. The application alleged that Air Canada was engaged in anti-competitive practices, namely operating or adding capacity at fares that did not cover the avoidable cost of providing the service.

This is the first case under the new airline regulations specifying that avoidable costs are to be the standard for assessing predatory conduct by dominant airlines. In the first phase of the hearing, the Tribunal agreed to consider and rule on specific questions related to the application of this test. The hearing, which began in August 2001, and was twice adjourned -- as a result of the events of September 11, 2001, and the illness of a Tribunal member -- recommenced in November 2002. Following 40 days of hearings, including testimony from representatives of CanJet, WestJet and Air Canada, as well as economic, accounting and industry experts, the hearing concluded in early March 2003. At the end of the fiscal year, the Tribunal's decision was pending.

Tango Inquiry

In October 2001, the Bureau began an inquiry into allegations that Air Canada had launched its discount brand Tango to drive Canada 3000 from the market (see the Bureau's 2001-2002 Annual Report for more information). Following an intensive examination and monitoring of Tango, the Bureau concluded that Tango did not constitute a "fighting brand" within the meaning of section 78. There was also no evidence that Tango was in breach of the new airline regulations relating to the operation of a low-cost second brand carrier. Accordingly, this inquiry was discontinued in March 2003.

In reporting the discontinuance, the Commissioner noted that the pending decision of the Competition Tribunal setting out the rules for the application of the avoidable cost test will have implications for Air Canada and all of its brands, including Tango.

Complaint by Jetsgo

In December 2002, the Bureau announced that it found no grounds to proceed with a complaint filed by Jetsgo regarding an agreement reached between Air Canada and the Government of Quebec. In return for Air Canada providing reduced fares for non-government users on 15 regional routes and continuing service on these routes, the Quebec government agreed to increase its volume of business with Air Canada. The Bureau concluded that this arrangement did not raise an issue under the Act, based on two main considerations. First, contrary to initial allegations, the agreement does not make Air Canada the exclusive provider of provincial government travel. Government employees remain free to choose the carrier best serving their needs in terms of price and schedule. Second, the agreement does not prevent other carriers from competing with Air Canada.

Other Examinations and Inquiries

During 2002-2003, the Bureau received and investigated a number of other complaints. At the end of the fiscal year, three enforcement files in the airline sector remained open. Two of these involve allegations of predatory pricing. The third matter relates to an airline's practice of withholding part of its inventory from the computer reservation system and marketing discount fares directly from its own Internet site or an online travel agency. The Bureau is continuing to examine these matters.

Legal Challenges to Section 104.1

Air Canada had launched two legal challenges to the Bureau's authority under section 104.1 of the Competition Act to issue temporary orders to firms in the airline industry during the course of its investigations (see the Bureau's 2001-2002 Annual Report).

• On December 19, 2002, the Supreme Court of Canada denied Air Canada's application for leave to appeal the Federal Court of Appeal's decision related to the CanJet complaint. This decision upheld the Competition Tribunal's decision to uphold the Commissioner's October 12, 2002, temporary order in this matter.
  
  
• On January 16, 2003, the Quebec Court of Appeal ruled section 104.1 of the Competition Act to be inoperative because it conflicts with rights to due process of law under the Canadian Bill of Rights. In March 2003, the federal government filed an application with the Supreme Court of Canada for leave to appeal this decision. The matter is pending.

Enforcement Cases

Deceptive Mailings

• In May 2002, Peter Kuryliw, the sole director of 1473253 Ontario Incorporated (Yellowbusiness.ca) pleaded guilty in the Ontario Court of Justice to sending a deceptive mailing for an Internet directory to more than 40 000 businesses and non-profit organizations. The mailing, which asked recipients to send a payment to a postal box in the Toronto area for an Internet business directory that listed details about their organizations, had the appearance of an invoice from an existing service provider, such as Bell Canada or the Yellow Pages. The investigation included seizure by the Bureau and Canada Post of mail containing an estimated $700 000 in payments. Mr. Kuryliw was fined $30 000 and given 90 days to dissolve his company. Further charges were laid in July 2002 against James Tetaka for his role in the scheme.
  
  
• In June 2002, charges were laid against four corporations following an investigation into deceptive mailings aimed at residents of the United States, United Kingdom, Australia and New Zealand. The four companies (HMS Direct Limited, Hallstone Products Ltd., 483775 B.C. Ltd, and Ravenshoe Services Limited) sent out mailings asking recipients to send a payment if they wished to participate in various international lotteries. The Bureau alleged the mailings exaggerated the amount that consumers could win and their chances of winning. The mailings also falsely indicated that consumers had already won substantial sums of money and misrepresented the companies' association with the government body issuing the lottery tickets. In August 2002, charges were laid against five individuals for their role in the deceptive mailings: David Stucky, Sylvia Carbone, Tom Taylor, Norm Pemberton and Janet Swanston.
  
  In March 2003, further charges were laid against HMS Direct, Hallstone Products and four individuals (David Stucky, Sylvia Carbone, Norman Pemberton and Janet Swanston) with regard to different unsolicited mailings that encouraged recipients to send money for a supposedly valuable prize. The Bureau received complaints from consumers in 91 countries over two years about these mailings, which promised recipients $5000 or an equivalent prize, but, instead, provided predetermined inexpensive pieces of jewellery.
  
  
• In October 2002, the Bureau laid charges against the Internet Registry of Canada and its principals, James Tetaka and Daniel Klemann, under the Competition Act's misleading representations provisions. The Bureau claimed that the company, which offered an Internet domain name registration service, marketed its services by sending mail solicitations to individuals and organizations whose domain names were about to expire. The solicitations had the appearance of invoices from the Government of Canada or other officially sanctioned agencies registering domain names.

Deceptive Telemarketing

• In June 2002, the Competition Bureau laid nine charges against Marvin Redler following a lengthy criminal investigation into the deceptive telemarketing and direct mail practices of a number of Montréal-based telemarketing firms from 1994 to 1999. Marvin Redler was a telemarketer with SS Viking Industries and CSRH Heritage Group Inc., which were charged with misleading advertising under the Competition Act in December 1999 and May 2000. He and other telemarketers informed consumers across Canada that they had been specially selected to win various prizes if they first purchased items such as pens, coins and lithographs at highly inflated prices. Consumers also had to send in additional fees, not disclosed at the time of purchase, to collect their prizes. The Competition Bureau received approximately 3100 consumer complaints about the four companies involved, with reported losses totalling approximately $1 040 000.
  
  
• In June 2002, the telemarketing company Tamec Inc., and its subsidiaries Commercial Information Bank of Canada and Deev Inc., pleaded guilty to deceptive telemarketing and misleading advertising charges under the Competition Act. The pleas followed a Bureau criminal investigation into deceptive telemarketing activities aimed at businesses, government institutions, and religious, educational and non-profit organizations across Canada. The Bureau received hundreds of complaints alleging that the telemarketers misrepresented the purpose of their calls, provided false information about the prior existence of a business relationship with Tamec and did not disclose restrictions that applied to the return of products. Complainants also alleged that the telemarketers did not disclose that, by agreeing to accept delivery of one edition of a Tamec business directory, organizations were actually entering into a multi-edition subscription.
  
  The accused parties pleaded guilty in the Court of Quebec and were fined $300 000. The Court imposed an order that prohibited the convicted parties and their officers from engaging in similar deceptive marketing practices for 10 years. Tamec also agreed to commit an additional $180 000 towards a remediation program offering victims up to $300 each in free goods and services.
  
  
• In July 2002, the Bureau laid charges against three telemarketers, Gerald Goldstein, Doron Kunin and Janice Gold, who allegedly made false or misleading representations to the public under the business names Farber Blake Corp., SD Prestige Enterprises Ltd. and JC & A. These follow similar charges in June 2001 against Farber Blake Corp., SD Prestige Enterprises Ltd., LA Premiums, JC & A, their principal directors and individual telemarketers.
  
  In January 2003, Farber Blake Corp. pleaded guilty to one criminal charge for misleading consumers in Canada and New Zealand. Farber Blake telemarketers told consumers they had won prizes in the form of cash, a boat or a cruise in the Bahamas if they first bought one of the company's promotional items. The Bureau found the company had misrepresented the nature, value and quality of both the prizes and promotional items and sold the latter at highly inflated prices. The company was fined $300 000.
  
  
• In October 2002, the Bureau worked jointly with the Toronto Strategic Partnership to lay charges against four individuals, David Dalglish, Lloyd Prudenza, Leslie Anderson and Mark Lennox, of First Capital Consumers Group for defrauding close to 100 000 American consumers of approximately $20 million during the previous year. This group, working out of boiler rooms in the Toronto area, told consumers with poor credit histories they had been approved for a Mastercard or Visa credit card but that receipt of the card was conditional on a prior payment of a one-time processing fee. The victims never received a valid credit card.
  
  
• In November 2002, the Bureau laid criminal charges against seven companies, 2951-8313 Quebec Inc., 3579573 Canada Inc., 1344667 Ontario Inc., 1319563 Ontario Ltd., 1230704 Ontario Inc., 1018961 Ontario Inc. and 1357280 Ontario Inc., and 10 individuals, Albert Mouyal, Ricardo Aquino, Attila Kristof Jausz, Adrian Towning, Charles Hamouth, Russell Todd Ivison, Jamie Lyons, Neil Underwood, Francis Loo and Sean Beesley, following an investigation into criminal deceptive telemarketing that targeted businesses and not-for-profit organizations across Canada and the U.S. The group of corporations, operating as Hanson Publications, Copier Supply Centre and Associated Merchant Paper Supplies, contacted businesses, with callers posing as suppliers of business directories, "swipe" cards and office toner, and allegedly invoiced consumers for products they had not ordered. The investigation is ongoing and additional charges may be laid.
  
  
• In November 2002, the Bureau laid charges against six companies and seven individuals for allegedly engaging in deceptive telemarketing that targeted businesses and not-for-profit organizations worldwide. Charged were 153595 Canada Inc., 3350550 Canada Inc., 174440 Canada Inc., 162014 Canada Inc., 162013 Canada Inc. and MM International Business Directories Limited, Michael Mouyal, Randy Misurak, Justine Pold, Stéphane Ouellet, Charles McCullough, Charles Picotte and François Lefort. The companies, operating under the names Commercial Business Supplies, Merchant Transaction Supplies, Merchant Supply Services and International Business Directories, sold paper rolls and cleaning cartridges used in debit and credit card machines as well as business directories and listings in those directories. Companies from around the world complained that telemarketers misrepresented themselves as their regular supplier, made false and misleading representations about prices and the renewal and duration of subscriptions, invoiced them for supplies they had not ordered, and charged prices that were significantly greater than the market price.
  
  
• In January 2003, five individuals, Doron Kunin, Jerry Browman, Lawrence Walsh, Marcus Miller and Michel Rosenberg, pleaded guilty and were sentenced by the Court of Quebec following a Bureau investigation into the deceptive telemarketing activities of two Montréal-based companies. In 2000 and 2001, the Bureau and PhoneBusters received numerous complaints that Alexis Corporation telemarketers were telling consumers they would win valuable prizes, ranging from cars and diamond bracelets to substantial cash amounts, if they first purchased a promotional item. The Bureau investigation, which relied on wiretaps to gather information about 3636135 Canada Inc. (Alexis Corporation) and 3587932 Canada Inc., its administrative affiliate, found that the telemarketers had significantly deceived and misled consumers about the quantity and value of these prizes. This matter is ongoing and a court date for the two companies has been set for the fall of 2003.
  
  
• In February 2003, charges were laid against seven individuals, Allan Shiell, Chris Quilliam, Sean Zaichick, Julian Shiell, Alex Korn, Nicholas Bridges and Cory Darren Besser, who were engaged in an Ontario-based telemarketing operation under the company names of MedPlan, Global and STF Group that grossed US$8 million the previous year. The telemarketing operation, which primarily targeted seniors living in the U.S., allegedly used high-pressure sales techniques to induce consumers to buy medical discount plans and to release bank account information. Funds were withdrawn without authorization from the victims' bank accounts and promises of a free trial period and refund conditions were not respected.

Multilevel Marketing

• In July 2002, the Bureau laid charges against Richard Guertin and Richard Arsenault, two directors of NSV Nutrinautes Inc., a Quebec company charged in March 2002 with violating the multilevel-marketing, pyramid-selling and misleading-representations provisions of the Act. The company and its directors operated a multilevel marketing plan known as the Cocooning Club that recruited new participants by exaggerating income expectations. Under the Competition Act, it is illegal to refer to earnings in a multilevel marketing plan without disclosing a typical participant's income. Further charges were laid in November 2002 against Marc Délisle for his role in this matter.
  
  
• In August 2002, the Bureau laid eight charges against All Communications Network of Canada Co. under the multilevel-marketing and pyramid-selling provisions of the Act. The company was charged with having recruited new participants to promote and sell long-distance telecommunication services by exaggerating income expectations without disclosing the income of a typical participant and with allegedly operating an illegal pyramid scheme by offering recruitment bonuses to participants who paid for the right to recruit other participants.

Price Maintenance

• In September 2001, the Bureau laid charges against Sherwood Co-operative Association Limited and Federated Co-operatives Limited following an investigation and hearings into allegations that the two companies through agreement, threat or promise attempted to maintain the price at which the Tempo gasoline retailer in Pilot Butte, Saskatchewan, sold its gasoline. In a preliminary hearing that took place in November 2002, the judge found that, while Sherwood Co-op and its principal had attempted to influence the price of gasoline sold at the station, this had not been done through agreement, threat or promise, as prohibited under section 61(1)(a) of the Competition Act. The charges were dismissed.
  
  
• In December 2001, the Bureau initiated an inquiry into the Quebec automobile repair industry after receiving a complaint under section 9 of the Competition Act. The complainants alleged that certain automobile insurance companies, body shops and suppliers of recycled parts were involved in activities contrary to sections 45 and 77 of the Act. The Bureau concluded that this was not the case and discontinued its inquiry on August 12, 2002.
  
  
• In October 2002, the Stroh Brewery Company (Quebec) Ltd. pleaded guilty to charges of price maintenance. The conviction followed a Bureau investigation revealing that Stroh prohibited convenience stores and other retail outlets in Quebec from discounting Stroh's bottled beer of various sizes by the case. The Federal Court of Canada imposed a $250 000 fine, the largest fine to date in a price maintenance case.
  
  
• In October 2002, Degussa AG of Germany, Lonza AG of Switzerland, and Nepera Inc. and Reilly Industries Inc. of the U.S. pleaded guilty to participating in an international conspiracy to fix prices and allocate market shares of vitamin B₃ sold in bulk in Canada between 1992 and 1998. Dr. Kumo Sommer, a Swiss national and former executive at Hoffmann-La Roche Ltd., a Swiss corporation, also pleaded guilty to participating in a number of conspiracies involving bulk vitamins between 1991 and 1997. The Federal Court of Canada imposed fines totalling CAN$3.875 million on the companies and CAN$150 000 on the former executive. Since September 1999, Canadian courts have imposed a total of approximately CAN$95.5 million against companies and individuals involved in bulk vitamin conspiracies.
  
  
• In December 2002, Japan-based Nippon Gohsei Industries, Ltd. pleaded guilty to charges of price fixing and market sharing resulting from the Bureau's international investigation into the food preservatives industry. The investigation revealed that Nippon was involved in a conspiracy to fix prices for sorbic acid and potassium sorbate, otherwise known as sorbates. Sorbates are primarily used as mould inhibitors in foods such as dairy and bakery products, flavours and spices, syrups and other processed foods commonly sold in grocery stores. Nippon is the fifth international company to be convicted of such offences in Canada in the last three years. The company was sentenced to pay a $100 000 fine for its part in the conspiracy.
  
  
• In February 2003, Rhone-Poulenc Biochimie SA, a wholly owned subsidiary of Aventis SA, pleaded guilty in the Federal Court of Canada to a charge of price fixing under the Competition Act. The charges followed a Bureau investigation revealing that between 1990 and 1999 Rhone-Poulenc was involved in a price-fixing conspiracy involving methylglucamine, a specialized chemical ingredient primarily used to facilitate the recording of high contrast X-ray images. Under the conspiracy provisions of the Competition Act, it is a crime for competitors to agree on the prices they will charge customers when so doing unduly lessens competition or unreasonably raises prices. The court imposed a $500 000 fine.

Price Maintenance Charges Under Subsection 34(2)

Under subsection 34(2) of the Act, the courts can issue an order prohibiting acts directed toward the commission of an offence without a finding or admission of guilt. The Bureau handled two such cases this year.

• In February 2003, as a result of an agreement with the Competition Bureau and Re/Max Ontario-Atlantic Inc., Re/Max Western Canada (1998) and Re/Max International Inc., the Federal Court of Canada issued a prohibition order under subsection 34(2) of the Competition Act requiring the companies to change certain pricing and advertising policies to address concerns under the price maintenance provisions of the Act. The Re/Max companies involved are in the business of granting franchises for real estate brokerages under the Re/Max brand name.
  
  The prohibition order followed an inquiry by the Bureau into allegations that a policy directive issued by both Re/Max Ontario-Atlantic and Re/Max Western prohibited their franchises and sales associates from advertising commission rates. In a number of instances, non-compliant sales associates were fired.
  
  The settlement will enhance competition for the real estate brokerage industry by allowing Re/Max franchises, brokers and agents to advertise commission rates or fees to the public. The prohibition order also prevents the companies from doing the following:
  
  
  • prohibiting their franchises or sales associates from setting independent commission rates or advertising such rates;
  • attempting to influence commission rates upwards by any means; and
  • pressuring independent publishers to refuse advertising from any Re/Max franchise or sales associates because of the commission rates advertised.
    
    
  The prohibition order further requires the companies to pay the Crown's legal costs.
  
  
• In March 2003, as a result of an agreement between the Competition Bureau and Toyota Canada Inc., the Federal Court of Canada issued a prohibition order under subsection 34(2) of the Competition Act requiring Toyota to amend certain aspects of its Access Toyota Program to address concerns under the price maintenance and misleading advertising provision of the Act. The Access Toyota Program started in 2000 in Manitoba and, at the time the prohibition order was issued, was in place in the four western provinces and parts of Quebec.
  
  The prohibition order followed an inquiry by the Bureau into allegations that Toyota was prohibiting dealers participating in the Access Toyota Program from selling vehicles below "Access/Drive-Away" prices. The inquiry also raised an issue under the misleading-representation provisions because the Access Toyota Web site indicated that Access Toyota dealers could sell vehicles for less than Access/Drive-Away prices without being penalized by Toyota.
  
  The settlement will enhance competition because Access Toyota dealers are now free to set their own prices, and consumers have the opportunity to negotiate the purchase of Toyota vehicles. The prohibition order also requires Toyota to amend its contractual relationships with Access Toyota dealers to ensure that dealers do not enter into agreements with each other on prices or discounts for Toyota vehicles, or make statements to the public that Toyota prohibits selling below Access/Drive Away prices.
  
  The prohibition order also requires Toyota advertising to include a disclaimer that Toyota dealers may sell vehicles for less than Access/Drive-Away prices and to pay the $200 000 cost of the Bureau's investigation. As part of the settlement, Toyota also made voluntary donations totalling $2.3 million to charitable organizations across Canada.

Deceptive Marketing Practices

• In May 2002, the Bureau filed a consent agreement with the Competition Tribunal against Phone Directories Company Inc., requiring it to refrain from making false or misleading representations when selling its directories. Business owners in British Columbia had complained that the U.S.-based company, which operates in B.C. under the name Western Phone Directories, had failed to deliver on the terms of promised publication dates, the number of copies to be distributed and the area of distribution. Under the terms of the consent agreement, the company agreed to stop making false or misleading representations about the number of directories to be published, the time period of publication and distribution, and the geographic area and density of distribution. Phone Directories Company Inc. also paid a $5000 administrative penalty.
  
  
• In May 2002, the Competition Tribunal found that PVI International Inc., Michael Golka and Darren Golka had made false or misleading representations when promoting a gas savings and emission reduction device called the Platinum Vapor Injector (PVI). The company and its principals enticed consumers into buying gas and diesel versions of the PVI by claiming it could reduce fuel consumption by as much as 22 percent, while also reducing harmful emissions. Expert testimony introduced by the Bureau showed these claims to be false or misleading, as were claims that the U.S. government had approved the PVI. The Tribunal ordered PVI International and its principals to cease making these representations for 10 years, the maximum time allowed under the Act, and ordered the company to pay an administrative penalty of $75 000. Michael Golka and Darren Golka were each ordered to pay $25 000.
  
  In July 2002, following an appeal filed in the Federal Court of Canada by PVI International Inc. and others, the Commissioner filed a cross-appeal seeking an order requiring the respondents to publish notices in Canadian newspapers and on the Internet describing the Tribunal's findings about the device.
  
  
• In July 2002, the Competition Bureau filed its first application with the Competition Tribunal under the ordinary selling price provisions of the Competition Act. The application against Sears Canada Inc. alleged that Sears referred to inflated regular prices when promoting certain tires to consumers at sale prices. The Competition Act recognizes that regular prices have a powerful effect on consumers. The Bureau's application requested that the Tribunal issue a prohibition order requiring Sears to stop the alleged conduct for 10 years, to publish a notice setting out the Tribunal's findings, and to pay an administrative penalty. In the course of the proceedings before the Competition Tribunal, Sears indicated that it will challenge the constitutionality of subsection 74.01(3) of the Competition Act.
  
  
• On December 13, 2002, Thane Direct Canada Inc. and the Commissioner of Competition filed a consent agreement with the Competition Tribunal concerning the sale and marketing of the Abtronic and the Abtronic Pro, two electronic muscle stimulation devices. The Bureau's inquiry concluded that Thane, through infomercials and its Web site, made representations that could give consumers the false impression that by using these devices they could lose weight, obtain well-defined abdominal muscles, replace the workout benefits of a fully equipped gymnasium and increase their strength, without doing any physical exercise. After being informed that the Bureau had commenced an inquiry, Thane requested a resolution by consent agreement. As a result, Thane agreed to stop selling and marketing the devices and any similar devices that offer weight loss or muscle toning with no exercise required, unless the Commissioner agrees that the claims are based on adequate and proper tests. Thane also agreed to provide refunds to any unsatisfied consumers, to broadcast more than 1000 corrective notices on major television stations across Canada and to pay a $75 000 administrative penalty.
  
  
• In December 2002, the Bureau registered a consent agreement with the Competition Tribunal involving the retail chains Fine Gold Jewellery and the Diamond Co. The agreement resulted from a Bureau investigation that found that the retailers deceived consumers by offering 50 percent discounts on gold and diamond jewellery based on supposedly regular prices that had actually been inflated. Under the terms of the consent agreement, the corporations and their officers agreed to stop making written or verbal representations about a regular selling price unless half of those products had been sold at that price in the previous 12 months. The operators of these 19 retail stores, 1376535 Ontario Limited, Tadros & Tadros Limited, Ibrahim & Tadros Inc., and Tadros and Mina Limited, agreed to pay a $25 000 administrative penalty. The consent agreement will remain in force for 10 years.

Consumer Packaging and Labelling

• In July 2002, the Bureau laid five charges against Modugno-Hortibec Inc., a company based in Quebec that specializes in packaging and selling garden products such as topsoil and compost. A Bureau inspection found that the quantity of certain compost and marble chips packaged under the names Canadian Garden, Master Gardener and Hortibec was less than indicated on the label. In January 2003, the company pleaded guilty to false or misleading representation. The Court of Quebec imposed a $4250 fine under the Consumer Packaging and Labelling Act.

Abuse of Dominance

• In March 2003, the Bureau concluded its investigation of IKO Industries Ltd., Canada's largest manufacturer of asphalt roofing products. The Bureau had received complaints that IKO was abusing its dominant market position and impeding the entry and expansion of competitors through its policy of giving distributors loyalty rebates on sales of residential asphalt roofing shingles. The Bureau had outlined its concerns about the distributor loyalty program, observing that it likely prevented or substantially lessened competition in the supply of low-end asphalt roofing shingles in Canada. In response to the Bureau's concerns, IKO modified its rebate program by giving customers a choice between loyalty and volume-based rebates. In addition, the level of rebate varies in the modified loyalty program with the volume of percentage of shingles purchased from IKO. These modifications diminish the incentive to exclusivity inherent in loyalty rebates.
  
  
• In October 2002, the Competition Bureau filed an application with the Competition Tribunal for an order prohibiting Canada Pipe Company Ltd./Tuyauteries Canada Ltée from engaging in anti-competitive acts through its Bibby Ste-Croix Division. The application followed an inquiry into complaints that Bibby, which was acquired by Canada Pipe in 1997, was abusing its dominant position in the supply of cast-iron pipe, fittings and mechanical joint couplings for drain, waste and vent applications in markets across Canada by introducing a loyalty program that locked in customers and eliminated competitors. Bibby required that its clients purchase all their drain, waste and vent products exclusively from it in order to obtain substantial rebates.
  
  The application asks the Competition Tribunal to order Canada Pipe to stop the alleged conduct, to ensure that similar conduct will not continue in the future, to prohibit Canada Pipe from being part of any acquisitions of cast-iron drain, waste and vent businesses in Canada for the next three years, and to notify the Bureau of any such acquisitions for the three years following the initial three-year period.
  
  
• In December 2002, a consent agreement between the Bureau and the Charter members of the Interac Association was filed with the Competition Tribunal, replacing the consent order issued in June 1996. (Recent amendments to the Competition Act replaced the consent order with a consent agreement filed with the Tribunal, which has the same effect as a consent order.)
  
  The consent agreement expands the range of financial institutions eligible to issue cards that use the Interac network. The additional financial institutions include life insurance companies, securities dealers, money market mutual funds and foreign bank branches. Allowing these additional financial institutions to issue debit cards will promote increased competition in financial services.
  
  This change reflects expanded access to the Canadian Payments Association following pro-competitive changes to federal financial institutions legislation. The Bureau supported these changes in its 1997 submission to the Task Force on the Future of the Canadian Financial Services Sector.
  
  
• In December 2002, the Bureau announced it was discontinuing its investigation into the Canadian motion picture distribution industry after an extensive inquiry did not identify any anti-competitive activity. The inquiry took place between April 2000 and October 2002. Complainants had alleged that major motion picture distributors, in concert with Famous Players Inc. and Cineplex Odeon Corporation, did not supply commercially valuable motion pictures to other exhibitors. The complainants claimed that this activity substantially lessened and prevented competition for motion picture exhibition in Canada.
  
  The Bureau concluded that there was insufficient evidence that Famous Players and Cineplex Odeon applied pressure to prevent distributors from supplying movies to independent exhibitors. As well, the Bureau found no evidence that distributor licensing preferences, or licensing a movie to only one theatre in a local area, violated the Competition Act.

Refusal to Supply

• In March 2003, the Bureau announced it had found no evidence to proceed against GlaxoSmithKline for blocking Canadian-based Internet pharmacies from exporting its products to the United States. The civil provisions of Canadian competition law pertaining to refusal to supply and market restrictions recognize that suppliers may set the terms and conditions of sales to businesses, provided they have reasonable business justification. The Bureau was advised by the U.S. Food and Drug Administration that these cross-border sales violated U.S. law, supporting GlaxoSmithKline's position that it had a reasonable business justification for blocking exports while continuing to supply the Canadian market. The Bureau examined this matter with respect to both the criminal and civil provisions of the Competition Act, and found no evidence to suggest the Act had been violated.
  
  
• In October 2002, the Bureau examined a complaint from a tour operator who had been denied access to an airport located in Ontario. After being notified by the Bureau of its examination under section 75 of the Competition Act, the airport decided to provide access facilities, giving consumers more choices for their travel.

Information Contacts/Visits

The Bureau may contact individuals during the course of an investigation when it believes that they may be unaware that their conduct raises concern under the Competition Act, Consumer Packaging and Labelling Act, Textile Labelling Act or Precious Metals Marking Act, and that they might comply with the legislation if it were explained to them. The people contacted are under no obligation to discuss the matter or justify their conduct but, should they decide to take voluntary corrective action, the Bureau would then determine whether to continue the investigation, monitor the anti-competitive conduct or close the file. Numerous information contacts were made during 2002-2003 in such areas as ordinary selling price representations, unsubstantiated performance claims, false and misleading representations, promotional contests, multilevel marketing and pyramid schemes, and labelling, packaging and marketing of consumer goods, textiles and precious metals.

Alternative Case Resolutions: Misleading Representations and Deceptive Marketing Practices

The Bureau resolved 67 matters through alternative case resolution under the misleading representations and deceptive marketing practices provisions of the Competition Act, and 104 matters under the three standards-based statutes.