Refusal to supply

What Is the Competition Bureau?

The Competition Bureau is an independent law enforcement agency responsible for the administration and enforcement of the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act. Its role is to promote and maintain fair competition so that Canadians can benefit from competitive prices, product choice and quality services. Headed by the Commissioner of Competition, the organization investigates anti-competitive practices and promotes compliance with the laws under its jurisdiction.

What Is the Competition Act?

The Competition Act is a federal law governing most business conduct in Canada. It contains both criminal and civil provisions aimed at preventing anti-competitive practices in the marketplace.

Refusal to Supply

There is no absolute obligation on any business to supply to, or buy a product from, another business. However, under certain circumstances, if your business refuses to supply another business or another business refuses to supply you, the Competition Act may apply.

Why Would a Supplier Refuse Supplies to a Customer?

The supplier might, for example, try to reduce costs by decreasing the number of distributors, or gain revenue by cutting out the intermediary.

Under What Circumstances Would the Competition Act Apply?

When all of the following requirements under the refusal to supply provisions of the Competition Act are met:

• the would-be customer shows that the business has been substantially affected, or that he is unable to carry on business, because they cannot obtain adequate supplies of a product on usual trade terms;
• the inability to obtain adequate supplies must result from a lack of competition among suppliers;
• the would-be customer must be willing and able to meet the supplier's usual trade terms;
• the product must be in ample supply;
• the refusal to supply has an adverse effect on competition in a market, or is likely to do so.

What Do the Following Words Mean?

"Substantially affected"

A business would be substantially affected if the product refused accounted for a large portion of its sales and was essential to its continued profitability or survival.

The overall effect of the refusal also depends on whether the product could be easily replaced by another product or related line of business, or whether the product must be used or sold in conjunction with others.

"adequate supplies of a product"

Someone who is refused supplies must pursue all alternate sources of supply, taking into account price, quality, delivery time and profit margin.

If the cost of a replacement product makes sales unprofitable, this would not be considered a reasonable alternative.

An article that is different from others by a trade mark or trade name is not a separate product, unless it dominates the market. Therefore, a refusal to supply a national brand would not raise a concern under the law, if another national or regional brand or generic equivalent were suitable replacements.

"lack of competition among suppliers"

If other suppliers are willing to supply the would-be customer, or if the inability to obtain adequate supplies is the result of a supplier's legitimate business decision and not for anti-competitive reasons, this condition may not be satisfied.

"usual trade terms"

A would-be customer must be able to meet the supplier's usual credit terms, purchase requirements, and reasonable technical and service requirements.

"ample supply"

If there is a shortage of the product resulting from, for example, a fire at a plant, raw material shortages, limited production capacity or inventories, this condition would not be met.

«adverse effect on competition»

A would-be customer must establish that the refusal to supply not only harms his/her business, but also that the competitive situation in a market is affected negatively.

What Happens After I Contact the Bureau to Make a Complaint?

Bureau staff will ask about your situation and market conditions to check whether the required conditions have been met. If they have, Bureau officers will begin confidential interviews and a review of records, documents and other sources of information. The Bureau can also apply to the courts for subpoenas or use other compulsory means to continue its investigation.

The Bureau conducts its investigations in private and keeps confidential the identity of the source and the information provided. However, if someone has important evidence about an offence under the Act, that person may be asked to testify in court.

How Does the Bureau Resolve Refusal to Supply Complaints?

Where appropriate, the Commissioner will open discussions to obtain voluntary compliance with the law. Sometimes, this is all the action needed to correct the situation.

A more formal solution would involve the registration of a consent agreement with the Competition Tribunal when all parties agree to a solution that will restore competition in the marketplace. The Competition Tribunal is like a court, chaired by a judge and independent of any government department.

If voluntary compliance cannot be achieved, the Commissioner may file an application before the Competition Tribunal for an order to remedy the situation. To overcome the effects of a refusal to supply, the Competition Tribunal may issue an order requiring that one or more suppliers accept the customer who was refused supply.

Private Access to the Competition Tribunal

The Competition Act allows a person to apply directly to the Competition Tribunal for a hearing when it believes that the actions of a supplier meet all the requirements under the refusal to supply provisions.

The Bureau produces CD-ROMS and publications on various aspects of the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act. To find out more about our CD-ROMs and publications, contact the Information Centre: Information Centre Competition Bureau 50 Victoria Street Gatineau QC K1A 0C9
Toll-free: National Capital Region: TDD (for hearing impaired): Fax: E-mail: Web site:	1 800 348-5358 (819) 997-4282 1 800 642-3844 (819) 997-0324 compbureau@cb-bc.gc.ca www.cb-bc.gc.ca
This publication is only a guide. It provides basic information about the Competition Bureau and the acts it administers. For further information, you should refer to the full text of the acts or contact the Competition Bureau at one of the numbers listed above.

Cat. No. RG52-29/2-2003
ISBN 0-662-67713-7