Annual Report of the Commissioner of Competition for the Year Ending March 31, 2000

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Appendix I: Discontinued Cases

The Bureau initiated a number of formal inquiries into allegations of anti-competitive activity. These inquiries dealt with a range of civil and criminal matters, including the following cases.

Seal Meat Inquiry: Conspiracy, section 45

On May 20, 1998, the Bureau began a formal inquiry into the eastern Canadian processed seal meat industry, following a complaint from six Canadian residents who alleged that certain seal meat processors had entered into an agreement not to compete with each other on price, nor to contest existing markets.

Following a thorough investigation, the Bureau found no evidence to support these allegations. The inquiry was discontinued on May 26, 1999.

Commission Rates Paid to Travel Agents on International Flights: Conspiracy, section 45

On July 5, 1998, the Competition Bureau launched an investigation into allegations that Canadian scheduled air carriers conspired to fix commission rates paid to travel agents for international flights, following receipt of complaints from travel agents in late 1997.

At the conclusion of a thorough two-year investigation, the Bureau determined that commission rates on international flights did not result from any agreement among international airline companies, but rather from competitive market pressures in an evolving marketplace. Accordingly, it closed its investigation.

Nitrogen Fertilizer: Conspiracy, Predatory Pricing and Abuse of Dominant Position, sections 45, 50 and 79

In July 1998, the Competition Bureau initiated an inquiry into a market for nitrogen fertilizers, following a six-resident application from those engaged in the retailing, application and transportation of such fertilizers. The applicants complained that a manufacturer of fertilizers and its vertically integrated distributor were seeking to drive them out of business, by selling the product at unreasonably low retail prices and refusing to supply it to the applicants. After careful examination, the Bureau concluded that the distributor and manufacturer priced the fertilizer and set the terms and conditions of sale in response to market forces and that the distributer did not abuse its market power. Accordingly, the Bureau determined that there was insufficient evidence to support the allegations and closed the inquiry.

Clothing Products: Price Maintenance, section 61

In February 1999, the Competition Bureau began an inquiry into the retail clothing industry, following a complaint from a retailer that a Canadian supplier of an exclusive brand of jeans refused to supply him with these products because of his low prices, and also prevented him from obtaining them elsewhere. As part of its inquiry, the Bureau held a compliance meeting with the supplier, who subsequently provided written assurances that it would comply with the provisions of the Act in the future and would also consider resupplying the complainant. Consequently, the Bureau closed the inquiry.

Provincial Water and Sewer Pipe: Conspiracy, section 45

In February 1998, the Bureau initiated an inquiry into a provincial water and sewer pipe market, following a request from the U.S. government under Article V f the 1995 Canada-U.S. Competition Agreement. An American manufacturer of water and sewer pipe alleged that three Canadian manufacturers had pressured pipe distributors in the province in question to refuse to deal in pipe imported from the U.S.

The evidence the Bureau obtained during its investigation was insufficient to establish a violation of the Competition Act. Further, reports of the alleged anti-competitive conduct ceased with the launch of the Bureau's inquiry. Subsequently, the U.S. manufacturer was able to obtain significant business in the province and prices for the pipe in question fell more than 20 percent. In light of these facts, the Canadian manufacturers undertook to create or reinforce compliance programs to ensure that their companies complied with provisions of the Act in future.

Distribution of Video Cassette Products: Conspiracy, Price Discrimination, Promotional Advertising and Price Maintenance, sections 45, 50, 51 and 61

On November 24, 1998, the Competition Bureau initiated an inquiry into the distribution of video cassette products, following a six-resident application alleging that certain video cassette distribution policies in Canada contravened the Competition Act. The inquiry did not produce any evidence substantiating the allegations and, therefore, was discontinued on March 31, 2000.

Cemetery Monuments: Conspiracy, Price Discrimination and Abuse of Dominant Position, sections 45, 50 and 79

On July 14, 1998, the Competition Bureau began a formal inquiry into the sale and display of cemetery monuments, following a six-resident application. The complainants alleged that an agreement between a municipality and a monument firm resulted in an unfair advantage for the latter and a significant decrease in market share for local monument retailers, and contravened the Competition Act. However, after a thorough investigation, the Bureau determined that the agreement resulted from a public tendering process. Accordingly, the inquiry was discontinued.

Milk: Exclusive Dealing, section 77

On March 16, 1999, the Bureau initiated an inquiry following receipt of a six-resident application under section 9 of the Competition Act. The application alleged that a milk producer in Quebec was using exclusive contracts to require retail merchants to buy liquid milk products only from the producer in question.

Subsequent interviews with the complainants revealed that, despite their concerns, the producer had, in fact, never engaged in the use of exclusive contracts. Consequently, there were no grounds to continue the inquiry and it was discontinued on April 28, 1999.

Mobile Street Sweeper Brushes and Brooms and Grader Blades: Refusal to Deal, Abuse of Dominant Position

The inquiry was initiated on March 29, 1996 following the receipt of an application under the Competition Act by six Canadian residents. The application alleged that a distributor of mobile street sweeper brushes and brooms and grader blades had engaged in a number of anti-competitive practices in the Alberta market. The allegations included refusal to deal and abuse of dominant market position. Subsequently, the complainants also alleged criminal infractions of bid rigging and price maintenance.

The evidence obtained in this inquiry did not establish the complainants' allegations and a recent tender for these products showed that there was competition in the relevant market. The inquiry was discontinued.

Other Examinations

Auto Glass Industry

After an extensive examination of the Canadian auto glass industry, the Bureau concluded that there were no grounds to warrant an application to the Competition Tribunal for a remedial order. The complainants had alleged that directing practices by auto insurance companies and auto glass networks to preferred auto glass shops favoured auto glass chains and had anti-competitive effects against independent glass shops. It was also alleged that insurance companies, auto glass networks and auto glass chains conspired to reduce competition unduly in the auto glass market. In addition, complainants claimed that prices established by insurance companies, auto glass networks and auto glass chains were below costs and only for the purpose of forcing independent glass shops to exit the market.

The Bureau found that the market is competitive and the new methods introduced by the insurance industry have benefitted consumers because the prices of auto glass services have declined.

Auto Body Repair Industry

After an extensive examination of a major market in the auto body repair industry, the Bureau concluded that the practice of directing insured vehicle owners to preferred shops has not substantially lessened competition. Therefore, there were no grounds to warrant an application to the Competition Tribunal for a remedial order. The complainants claimed that the practice by auto insurance companies of directing insured vehicle owners to preferred auto body shops resulted in reduced business for non-preferred or independent auto body shops and lessened competition in auto body repair services. It was also claimed that insurance companies did the following:

• limited the number of preferred shops, which precluded qualified independent shops from becoming preferred shops
  
  
• required preferred shops to provide a discount on the hourly labour rate and on parts, and to cut costs by only using generic replacement parts
  
  
• paid independent shops for vehicle repair only at a predetermined labour rate set by the insurance company.

The Bureau recognized the potential for such business practices to be anti-competitive and raise an issue under the Competition Act if they led to a substantial lessening of competition. However, the Bureau concluded that the practices had not resulted in, nor were likely to result in, a substantial lessening of competition, and therefore closed the examination.

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