Proposed outsourcing of processing

A supplier of a product sought a written opinion in September 2003 to determine whether a proposed service arrangement with a processing company would raise concerns under the Competition Act. The supplier had previously processed the product at its own facility but had decided to close that facility and outsource its processing requirements.

The Bureau examined the proposal under the criminal and civil provisions of the Act , specifically those on conspiracy (section 45), refusal to deal (section 75), exclusive dealing, tied selling and market restriction (section 77) and abuse of dominant position (section 79). Based on its understanding of the facts, the Bureau determined that should the parties implement the arrangement as proposed, the Bureau would not have sufficient grounds to launch an inquiry for the following reasons.

  • The proposed arrangement related specifically to providing processing services to the supplier and did not affect any existing arrangements the processor might have had with its customers, nor did it preclude the processor from taking on new customers.
  • The supplier's decision to close its processing facility was a unilateral decision and not the result of an agreement with the processor.
  • The processor took measures to ensure the proposed service arrangement would not affect output.
  • There were other processors in the market.
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