Examination of the distribution agreement for the Rolling Stones' Four Flicks DVD set

Backgrounder

December 18, 2003

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Overview

HMV Canada Inc. (HMV) filed a complaint with the Competition Bureau, in November 2003, regarding the exclusive agreement between Best Buy Canada Ltd./Magasins Best Buy Ltée. (Best Buy) and TGA Entertainment Ltd. (TGA), with respect to the distribution of the Rolling Stones' Four Flicks music DVD set. HMV alleged that the exclusivity deal between Best Buy and TGA breached the Competition Act by denying access to supply of a product and reducing competition at the retail level.

The Bureau examined these allegations under the exclusive dealing, refusal to supply, and abuse of dominance provisions of the Competition Act. The examination did not establish the existence of the requisite exclusionary and anti-competitive effects for there to be an offense under the Act. The Bureau concluded that the agreement in question does not violate the Act.

The following is a detailed explanation of the examination under each applicable provision of the Act:

Exclusive Dealing – section 77

Exclusive dealing arrangements are a common business practice used by retailers to differentiate products offered. As such, exclusive arrangements are not in and of themselves contrary to the law. The Bureau, nonetheless, examines all complaints concerning such arrangements under the Competition Act.

Generally speaking, the Bureau may intervene in matters involving exclusive arrangements when strict conditions, as outlined in section 77 of the Act, are satisfied. For instance, an exclusive arrangement violates the law in situations where it is a practice engaged in by a major supplier of a product or is widespread in a market; and where it has some exclusionary effects such that competition is lessened substantially.

In this case, the exclusivity agreement regarding one DVD set released by a single artist over a limited time period does not constitute an anti-competitive practice.

Refusal to Supply – section 75

The conditions to be met under the refusal to supply provision are set out in section 75 of the Act. In particular, the business being refused supply must be substantially affected or be precluded from carrying on business due to an inability to obtain adequate supplies of a product anywhere in a market on usual trade terms. The inability to obtain adequate supplies of the product must be due to insufficient competition among suppliers of the product.

Given that the DVD segment includes many titles that retailers may carry, the Bureau cannot demonstrate that HMV is substantially affected in its business or is precluded from carrying on business due to an inability to access one particular DVD set.

Abuse of Dominance – section 79

Section 79 of the Act addresses the abuse of dominance provision. Under this provision, it must be established that a dominant supplier of a product is engaging in a practice of anti-competitive acts, with the result that competition is being lessened substantially.

There are numerous producers and retailers of music and video products. Consequently, neither TGA nor Best Buy is in a position to control the markets in which it competes. Hence, neither is a dominant supplier in its respective markets.

Conclusion

On the basis of the facts outlined above, the Bureau has concluded its examination of this complaint.