Skip to content | Skip to institutional links

Common menu bar links

Annual Report of the Commissioner of Competition For the Year Ending March 31, 2006

on the enforcement and administration of the:

Competition Act
Consumer Packaging and Labelling Act
Precious Metals Marking Act
Textile Labelling Act

March 31, 2006

Letter of Presentation
Message from the Commissioner
Chapter 1: Introduction
Chapter 2: Attacking Criminal Activities
Chapter 3: Preventing Abuse of Dominance and Other Anti-competitive Business Practices
Chapter 4: Eliminating False or Misleading Representations and Deceptive Marketing Practices in the Marketplace
Chapter 5: Rewiewing Mergers
Chapter 6: Advocating for Competition and for International Co-ordination
Chapter 7: Modernizing Canada's Approach to Competition Law
Chapter 8: How We Do it All
Appendix I: Discontinued Inquiries
Appendix II: Speeches and Papers
Appendix III: Conferences and Seminars

For information on the Competition Bureau's activities, please contact:

Information Centre
Competition Bureau
50 Victoria Street
Gatineau QC K1A 0C9

Tel.: 819-997-4282
Toll free: 1-800-348-5358
TDD (for hearing impaired): 1-800-642-3844
Fax: 819-997-0324

E-mail: compbureau@cb-bc.gc.ca
Web site: www.competitionbureau.gc.ca

This publication can be made available in alternative formats upon request. Contact the Competition Bureau's Information Centre at the numbers listed above.

For information on the merger provisions of the Competition Act, including those related to the notification of proposed transactions, please contact the Competition Bureau's Mergers Branch as follows:

Mergers Branch
Competition Bureau
50 Victoria Street
Gatineau QC K1A 0C9

Tel.: 819-953-7092
Fax: 819-953-6169

Permission to Reproduce

Except as otherwise specifically noted, the information in this publication may be reproduced, in part or in whole and by any means, without charge or further permission from the Competition Bureau provided due diligence is exercised in ensuring the accuracy of the information reproduced; that the Competition Bureau is identified as the source institution; and that the reproduction is not represented as an official version of the information reproduced, nor as having been made in affiliation with, or with the endorsement of, the Competition Bureau.

For permission to reproduce the information in this publication for commercial redistribution, please e-mail copyright.droitdauteur@communication.gc.ca.

Cat. No.: Iu50-2006
ISBN: 0-662-49437-7

Letter of Presentation

Gatineau, Quebec

The Honourable Maxime Bernier, PC, MP
Minister of Industry
Ottawa, Ontario K1A 0H5

Dear Sir:

I have the honour to submit, pursuant to section 127 of the Competition Act, the following report on the operation of the Competition Act, the Consumer Packaging and Labelling Act (except as it relates to food), the Textile Labelling Act and the Precious Metals Marking Act for the fiscal year ending March 31, 2006.

Sheridan Scott
digital signature
Commissioner of Competition

Message from the Commissioner

This year has been exceptionally busy for the Competition Bureau¹ both domestically and internationally. In last year's Annual Report, I outlined our priorities for the year ahead, and I am pleased to report that we have been remarkably successful in achieving them.

The record fines of $37.5 million and the removal of key personnel from three paper merchants last January attest to the Bureau's success in the prosecution of domestic cartels. Cascades Fine Papers Group Inc., Domtar Inc., and Unisource Canada Inc. pleaded guilty to two counts of conspiring to unduly lessen competition in the carbonless sheet markets in Ontario and Quebec in an outcome that clearly puts corporate executives and employees on notice that they are personally accountable for their actions. The decision also highlights the Bureau's tough stance against domestic cartels.

Another Bureau achievement lies in our investigation of cases relating to mass marketing fraud. A total of 166 charges were laid against companies and individuals over the year for defrauding consumers and businesses via the telephone, the Internet, print media, direct mailings and other means. One of our cases, Alexis Corporation, was concluded this past year with the sentencing of the last of 11 individuals involved in a deceptive telemarketing operation. The other 10 individuals were each sentenced at different times from 2002 to 2005. During our criminal investigation of this matter, wiretaps were used to gather evidence of a prize-pitch scam targeting consumers in Australia. Another of our cases concerned CSCT Inc., where the Bureau laid charges against two individuals for making false or misleading cancer therapy claims to vulnerable consumers, creating false hope for those in need of serious medical treatment. The claims were made on the company's Web site, at seminars, in alternative health-care magazine articles and advertisements, in direct mailings and in telephone communications.

Helping Canadians protect themselves against fraud is yet another of our achievements. The Bureau and its more than 80 public, private and volunteer sector partners conveyed nearly 75 millions occurrences of fraud prevention messages this year.

This past year we also reviewed a number of important mergers in a wide range of areas, including agriculture, the media and beef processing. As a result of our extensive review of Cineplex Galaxy Limited Partnership's interest in acquiring Famous Players Division of Viacom Canada Inc., 34 theatres in 17 Canadian cities were sold, ensuring that consumers continue to benefit from competitive prices and choice in the exhibition of first-run motion pictures.

We have also been active on the telecommunications front. On August 15 and September 15, 2005, we filed submissions to the Telecommunications Policy Review Panel as part of the Panel's consultation on Canada's telecommunications policy and regulatory framework. Our recommendations advocated a greater role for competition principles in assessing the need for regulation. In March, the Panel issued its report, which made a number of recommendations to the Minister of Industry consistent with our views.

Finally, we played a leadership role on the international stage in our dealings with a number of organizations, including the International Competition Network, the Competition Committee and the Committee of Consumer Policy of the Organization for Economic Co-operation and Development, the International Consumer Protection and Enforcement Network, and the Asia-Pacific Economic Cooperation Competition Policy and Deregulation Group. In addition, in September 2005, we signed a co-operation agreement with Japan to work together to improve the enforcement of competition laws.

Looking ahead, I see the Bureau continuing to focus on national cartels and local bid-rigging, mass marketing fraud involving vulnerable Canadians and business supply cases, fraudulent and misleading health performance claims in the electronic marketplace, and abusive behaviour by dominant firms in the marketplace. Carrying out this work and meeting our many challenges is possible only because of the dedication of the Bureau's many outstanding employees. I would like to conclude by thanking all of them for their impressive accomplishments this year.

Sheridan Scott

Commissioner of Competition

Chapter 1: Introduction

The Bureau works to support a dynamic, healthy, innovative and competitive marketplace in which Canadians can enjoy the benefits of competitive prices, product choice and quality services. The Bureau accomplishes this by promoting and maintaining competition.

A competitive marketplace promotes the efficiency of the economy, expands opportunities for Canadian enterprises in world markets, ensures that small and medium-sized businesses have equal opportunities and provides consumers with competitive prices, competitive product choice and accurate product information. Competition is the foundation of a strong, modern and knowledge-based economy, spurring innovation, competitiveness and productivity growth.

The Bureau administers four laws that help encourage and maintain competition in Canada: the Competition Act, the Consumer Packaging and Labelling Act (for non-food products), the Precious Metals Marking Act and the Textile Labelling Act. This report summarizes the Bureau's activities under these statutes for the fiscal year that ended on March 31, 2006.

The Bureau operates on the assumption that most businesses are law-abiding and, therefore, comply with the law and support marketplace framework legislation. The Bureau sees vigorous communication and advocacy as effective ways to achieve compliance and, consequently, works to inform businesses and other stakeholders about the laws. Through its advocacy program, the Bureau actively promotes a competitive marketplace and develops competition policy and legislation in Canada and internationally.

The Bureau's commitment to educating the players in the marketplace is complemented by several forms of voluntary compliance. These range from written opinions, which help businesses that want to avoid breaking the law, to alternative case resolution, which corrects anti-competitive behaviour in a timely and cost-effective fashion.

Businesses and individuals that disregard the law or fail to take advantage of opportunities for voluntary compliance may be prosecuted by the Attorney General of Canada in criminal court or be subject to civil litigation by the Bureau before the Competition Tribunal or in civil court.

This report deals with the Bureau's activities in the following areas:

Attacking Criminal Activities (Chapter 2);
Preventing Abuse of Dominance and Other Anti-competitive Business Practices (Chapter 3);
Eliminating False or Misleading Representations and Deceptive Marketing Practices in the Marketplace (Chapter 4);
Reviewing Mergers (Chapter 5);
Advocating for Competition and for International Co-ordination (Chapter 6);
Modernizing Canada's Approach to Competition Law (Chapter 7); and
How We Do It All (Chapter 8).

This report seeks to show how the Bureau's activities over the past year have benefited Canadians. For statistical data and legal references, please visit the Bureau's Internet site.

1.1 Organizational Structure

In 2005-2006, the Bureau employed 368 people in the National Capital Region and 85 in seven regional offices. The regional offices are located in Halifax, Montreal, Toronto, Hamilton, Winnipeg, Calgary and Vancouver. As the organizational chart below shows, the Bureau comprises eight branches.

Commissioner of Competition:
- Mergers
- Criminal Matters
- Civil Matters
- Compliance and Operations
- Economic Policy and Enforcement
- Fair Business Practices
- External Relations and Public Affairs
- Legislative and Parliamentary Affairs

The Commissioner of Competition is head of the Bureau and is responsible for administering and enforcing the Competition Act, the Consumer Packaging and Labelling Act, the Precious Metals Marking Act and the Textile Labelling Act.

The Civil Matters Branch reviews anti-competitive behaviour, such as abuse of dominant position, and restraints imposed by suppliers on customers, such as refusal to supply, exclusive dealing and tied selling.

The Compliance and Operations Branch oversees the Bureau's compliance program, enforcement policy, training program and client services. It also manages the Bureau's Information Centre and its planning, resource management, administration and informatics activities.

The Criminal Matters Branch administers and enforces the criminal provisions of the Competition Act, including provisions covering conspiracies that unduly lessen competition (such as price fixing) and bid-rigging, price discrimination, predatory pricing and price maintenance. The Branch carries out its enforcement activities through its National Capital Region office and its regional offices across Canada.

The Economic Policy and Enforcement Branch provides economic advice and expertise as well as enforcement support to the Chief economist and the Bureau.

The External Relations and Public Affairs Branch encompasses the International Affairs and Communications divisions as well as stakeholder relations. The Branch advances the Bureau's interests in international co-operation, negotiations and policy development. It also ensures that Canadian consumers, businesses and the international community are aware of the Bureau's crucial contribution to competition in the marketplace and to the growth of the Canadian economy.

The Fair Business Practices Branch administers and enforces the provisions of the Competition Act that cover false or misleading representations and deceptive marketing practices. Among these provisions are those that deal with deceptive telemarketing, multi-level marketing and pyramid selling schemes, as well as misrepresentations, such as general false or misleading statements, false or misleading ordinary price claims and promotional contests in which organizers inadequately disclose contest rules. The Branch also administers and enforces the Consumer Packaging and Labelling Act, the Precious Metals Marking Act and the Textile Labelling Act, collectively known as the standards-based statutes. The Branch carries out its investigations through its National Capital Region office and the regional offices.

The Legislative and Parliamentary Affairs Branch is responsible for the ongoing modernization of the Competition Act, for managing and co-ordinating all Bureau matters dealing with the parliamentary process and for assisting the Bureau in matters related to policy and advocacy.

The Mergers Branch reviews merger transactions to assess whether a merger is likely to prevent or substantially lessen competition.

Chapter 2: Attacking Criminal Activities

The Bureau administers and enforces provisions of the Competition Act prohibiting conspiracy, bid-rigging, price discrimination, predatory pricing and price maintenance.

The conspiracy provisions cover agreements between two or more competitors to unduly lessen competition such as agreements to fix prices or allocate customers and territories.

The bid-rigging provisions deal with agreements to thwart the competitive tendering process used to acquire products or services.

The price discrimination provisions help ensure that small and medium-sized businesses have an equal opportunity to participate in the economy by requiring suppliers to make discounts, price concessions and advertising allowances available to competing customers on fair terms.

The predatory pricing provisions address situations in which a firm engages in a policy of selling products below cost for a sufficiently long period of time to eliminate or deter rivals as competitors and subsequently raises prices or otherwise harms the competitive process.

The price maintenance provisions are designed to provide resellers of products with the freedom to set their own prices and to protect suppliers from customer-led boycotts because they supply firms with low-pricing policies.

The Bureau has a range of tools at its disposal to enforce these laws. It refers the most serious matters to the Attorney General of Canada and recommends prosecution. Offenders may receive heavy fines, prison terms or both.

The first section of this chapter describes the Bureau's responses to non-conformity on the part of businesses in relation to the Competition Act during 2005-2006. The Bureau may also work with firms to eliminate anti-competitive behaviour through alternative case resolution. Examples of this are provided in the second section of this chapter. Finally, under the Act, parties may request written opinions, some of which are summarized in the third section of this chapter. For more information on these cases and others, including information notices, news releases and backgrounders, please visit the Bureau's Internet site.

2.1 Prosecutions

2.1.1 Conspiracy

The conspiracy provisions of the Competition Act prohibit agreements between two or more persons to prevent or unduly lessen competition or to unreasonably enhance the price of a product. Agreements between competitors to fix prices, to allocate customers or geographic markets, or to restrict production of a product by setting quotas among competitors or other means are considered to be "hard-core" cartel activities. These are universally recognized as among the most harmful forms of anti-competitive conduct. Anti-competitive agreements harm both consumers and businesses, and enforcing the conspiracy provisions is an important priority for the Bureau. Much of the Bureau's work in this area involves investigating and prosecuting international cartels, which is a crucial activity for competition agencies around the world.

Carbonless Paper Sheets

In January 2006, three paper merchants operating in Canada - Cascades Fine Papers Group Inc. and Domtar Inc. (Canadian corporations) and Unisource Canada Inc. (an American corporation) - pleaded guilty to two counts of conspiring to unduly lessen competition in the carbonless sheet markets in Ontario and Quebec. Commercial printers use carbonless sheets in the manufacturing of forms and receipts. The Superior Court of Justice in Toronto sentenced each company to record fines of $12.5 million for taking part in the domestic conspiracy and also issued a prohibition order against the companies. Key personnel involved in the conspiracy will be removed from their positions in the paper merchant business.

Graphite Electrodes

In May 2005, Mitsubishi Corporation, a Japanese corporation, was convicted and fined $1 million for aiding and abetting a foreign-directed conspiracy to fix the price of graphite electrodes in Canada. In December 2005, Nippon Carbon Co. Ltd., also a Japanese corporation, pleaded guilty to participating in the international graphite electrodes cartel and was fined $100,000. Mitsubishi and Nippon are the sixth and seventh parties to be convicted in Canada for participating in the graphite electrodes cartel. UCAR Inc., SGL Carbon Aktiengesellschaft, Tokai Carbon Co., Mitsubishi Corp. and two former UCAR executives were previously fined a total of nearly $24 million for their roles in the international conspiracy. Graphite electrodes are used in the production of steel in electric arc furnaces and for steel refining in ladle furnaces.

Nucleotides

In August 2005, Ajinomoto Co. Inc., a Japanese corporation, and CJ Corp., a Korean corporation, pleaded guilty to participating in a conspiracy to fix prices of nucleotides in Canada. Ajimoto was fined $1.5 million and CJ Corp. was fined $175,000. Nucleotides are used as flavour enhancers in soups, sauces, spices and other foods.

St. John's Taxi

In July 2004, the Bureau laid charges against six taxi companies and seven individuals. It alleged that between 1992 and 2004 the taxi companies agreed to not compete with one another for contracts to supply taxi services to institutional and commercial facilities in St. John's, Newfoundland. A preliminary inquiry was held from January 9 to February 4, 2006, in the Provincial Court of Newfoundland and Labrador. Closing arguments are scheduled to take place between May 31, 2006, and June 2, 2006.

2.1.2 Price Maintenance

The Competition Act prohibits attempts by agreement, threat, promise or any like means to influence upward the prices of a reseller's products or to discourage the reduction of those prices. Refusal to supply or discrimination in the supply of products to resellers with low-pricing policies is also illegal under the Act. These provisions, known as the price maintenance provisions, are designed to ensure that resellers, notably retailers, are free to set their own prices for their products. These provisions also protect suppliers from customer-led boycotts because they have decided to do business with other suppliers that have low prices.

Labatt Beer

In November 2005, Labatt Brewing Company Limited pleaded guilty in the Court of Quebec to a charge of price maintenance of the company's discount beer sold by nine independent convenience/grocery retailers in Sherbrooke and elsewhere in Quebec. The Court fined Labatt $250,000 and issued a prohibition order against the company. Under the prohibition order, Labatt is required to inform all of its Quebec independent convenience/grocery retailers in writing that under section 61 of the Act the company or its representatives cannot by agreement, threat, promise or similar means attempt to influence upward or discourage the reduction of the price of alcoholic beverages.

2.2 Alternative Case Resolution

The Bureau chooses the best and most efficient means of restoring competition in the marketplace. Some matters may be resolved quickly and easily, without a full inquiry or judicial proceeding, through alternative case resolution. Matters resolved in this way reduce uncertainty and save time, and lengthy court actions are avoided.

The following are summaries of cases resolved through alternative case resolution.

2.2.1 Bid-Rigging

The Competition Act prohibits agreements between two or more persons, usually competitors, to not submit a bid in response to a tender, as well as agreements that set the bids various parties will submit. However, the bid-rigging provisions do not apply when the parties make the agreement known to the tendering authority before they submit their bids. This allows the tendering authority to cancel the tendering process or modify it in a way that keeps it competitive. Bid-rigging often targets government agencies and ultimately is a drain on the taxpayer. The Bureau has a well-developed program to help purchasing officials prevent and detect bid-rigging. The program also provides tendering authorities who suspect they are a victim of bid-rigging with guidance on how to help the Bureau with its investigation.

School Bus Transportation

On February 2, 2005, the Bureau received a complaint about alleged bid-rigging following a school board's call for tenders for a contract for school bus transportation in the Quebec City region. A review of the bids suggested that four bidders had consulted each other before submitting bids for separate and distinct routes so that they could share the territory. However, the Bureau did not find any evidence of collusion among the four bidders.

In order to encourage these companies to comply with the Act in the future, Bureau officers met with their managers to provide them with information on its provisions. Official written notices and letters of warning about the alleged offence were also sent to the companies.

2.2.2 Price Maintenance

Welding Supplies

In February 2005, the Bureau received a complaint regarding a welding supplies company and its alleged involvement in price maintenance activities. Officers interviewed the complainant and obtained certain documentation about the alleged offence. In November 2005, the Bureau informed the welding supplier that the alleged behaviour would likely contravene the price maintenance provisions of the Competition Act. The supplier assured the Bureau that it would take the necessary measures to ensure compliance with the Act.

2.3 Written Opinions

The Bureau provides legally binding written opinions to businesses seeking to comply with the Competition Act. Company officials, lawyers and others may request a written opinion on whether a proposed business plan or practice would raise concerns under the Act. The Bureau's written opinions take into account jurisprudence, previous written opinions and current policies. Written opinions remain binding for as long as the material facts remain substantially unchanged and the conduct or practice is carried out substantially as proposed.

To promote compliance with and foster transparency in the administration and enforcement of the Act, the Bureau publishes detailed summaries of its written opinions on its Internet site.

The following are examples of the written opinions the Bureau issued in 2005-2006.

2.3.1 Conspiracy and Price Maintenance

The conspiracy provisions cover agreements between two or more competitors to unduly lessen competition such as agreements to fix prices or allocate customers and territories. The price maintenance provisions are designed to provide resellers of products with the freedom to set their own prices. The following summaries describe written opinions provided by the Bureau on whether specific conduct raised issues under these provisions.

2.3.2 Residential Real Estate Legal Services Fees Schedule

In January 2006, the Working Group on Lawyers and Real Estate from Ontario sought a written opinion on whether a plan to develop and institute a suggested fee schedule for real estate transaction legal fees would raise concerns under the Competition Act.

The Bureau examined the proposed fee schedule under the conspiracy (section 45) and price maintenance (section 61) provisions of the Act and determined that it would not have sufficient grounds to launch an inquiry because:

the fee schedule explicitly stated that participation was voluntary and that no person would be sanctioned, policed, punished or in any way disadvantaged for not following it; and
adherence to or departure from the fee schedule was at the option of the parties involved and subject to no adverse consequences.

2.3.3 Industry Dealers

In July 2005, the Bureau received a request for an advisory opinion on whether a proposed program might raise concern under the Competition Act. The program entailed the formation of a committee of industry dealer representatives to develop and implement best practices to maximize customer satisfaction in vehicle sales. The Bureau examined the request under the price maintenance provisions of section 61 of the Act and determined that the proposed program would not provide it with sufficient grounds to launch an inquiry under section 10 of the Act.

Chapter 3: Preventing Abuse of Dominance and Other Anti-competitive Business Practices

The Bureau acts as a referee in the marketplace to address competition-related disputes that arise between businesses or between consumers and businesses. It investigates possible anti-competitive behaviour, such as abuse of dominance, and restraints imposed by suppliers on customers, such as refusal to supply, exclusive dealing and tied selling.

When appropriate, the Bureau opens discussions to try to obtain voluntary compliance with the law. Sometimes this is all the action needed to correct the situation. A more formal solution involves registering a consent agreement with the Competition Tribunal, whereby all parties agree on a solution that will restore competition to the marketplace. If voluntary compliance cannot be achieved, the Bureau may file an application with the Competition Tribunal for an order to remedy the situation.

3.1 Enforcement Actions

Abuse of dominance occurs when a dominant firm in a market or a dominant group of firms engages in conduct intended to eliminate or discipline a competitor or to deter future entry by new competitors into the market, with the result that competition is prevented or substantially lessened. The Bureau considers market dominance to be synonymous with market power. The most straightforward indication of the existence of market power is the ability of a firm or group of firms to raise prices above competitive levels for a considerable period of time.

3.1.1 Canada Pipe (Bibby)

On February 3, 2005, the Competition Tribunal issued a decision dismissing the Bureau's 2002 application for an order prohibiting Canada Pipe Company Ltd/Tuyauteries Canada Ltée from engaging in anti-competitive acts through its Bibby Ste-Croix Division. The Bureau alleged that Bibby was abusing its dominant position in the market for cast iron pipe, fittings and mechanical joint couplings for drain, waste and vent applications in Canada. The company's loyalty program required its clients to purchase all their drain, waste and vent products exclusively from Bibby in return for substantial rebates. The Bureau argued that the loyalty program locked in Bibby's customers and reduced competition from potential entrants and existing competitors.

The Tribunal concluded that Canada Pipe controlled more than 80 percent of the market but that its loyalty program was not anti-competitive and, based on the evidence, had not substantially lessened or prevented competition.

On March 7, 2005, the Bureau filed a notice of appeal of this decision with the Federal Court of Appeal. Canada Pipe filed a notice of cross-appeal on March 17, 2005. The hearings were held on February 7 and 8, 2006. A decision is pending.²

3.1.2 Gasoline Sector

Gasoline prices in the aftermath of Hurricane Katrina

On March 30, 2006, the Bureau released its results of an examination of an unprecedented spike in Canadian gasoline prices following Hurricane Katrina. The Bureau launched its examination to determine if increases in wholesale and retail gasoline prices in the fall of 2005 stemmed from a breach of the Competition Act. In particular, it focussed on whether the price increases resulted from anti-competitive behaviour among the integrated gasoline refiners/retailers or whether the increases were caused by major changes to the North American supply of wholesale gasoline resulting from the hurricane. It found that the latter caused major supply disruptions in the U.S. leading to rapidly rising gasoline prices throughout North America.

Predation in Gasoline Markets

On March 30, 2006, the Bureau released findings from an examination which stemmed from complaints by independent gasoline retailers, to determine whether refinery-owned gasoline and large independent retailers abused their dominant position to lessen competition. While the Bureau examined each complaint, it focussed on retailers from Ontario and New Brunswick, where the majority of complaints originated. It investigated allegations that the national refinery-owned and large independent retailers in these areas dropped gasoline prices below their costs during certain periods in order to eliminate independent retailers (predatory pricing). It also examined complaints that the national refinery-owned gasoline retailers charged higher wholesale prices to independent retailers that competed with their outlets at retail (margin squeezing). It found no evidence to support claims of margin squeezing and predatory pricing by national integrated firms and large-volume independent gasoline retailers.

In conducting its examination, the Bureau gathered information from publicly available resources as well as from direct contact with market participants who provided proprietary data. The Bureau also retained the consulting firm LECG to understand the key determinants of profitability for retail gasoline stations. The independent report What Determines the Profitability of a Retail Gasoline Outlet? A Study for the Competition Bureau of Canada found that retailers are relying on higher volumes and ancillary services such as convenience stores and car washes to earn profits.

Gasoline Prices in Niagara Falls

In February 2005, the City of Niagara Falls complained to the Bureau that its gasoline prices were the highest in the Niagara Region. Gasoline prices can vary from place to place because of differences in operating or transportation costs, taxes, and local supply and demand conditions, notably the number, size and type of retailers. The Bureau found that prices in Niagara Falls were not consistently higher than those in the surrounding area. It also did not find any reason to believe that retail gasoline prices in Niagara Falls were the result of anti-competitive conduct.

3.1.3 Airline Industry

During 2005, the Bureau reviewed allegations of predatory pricing by a major airline carrier. The alleged behaviour was said to have caused the bankruptcy of a low-cost airline carrier. Even though the alleged predator appeared to meet the threshold of dominance on certain routes, the Bureau concluded that it was not engaged in predatory behaviour.

3.1.4 Analysis of Scanner Data

In January 2006, the Bureau determined that Canada's largest sellers of tracking data and services for retail sales of consumer packaged goods did not engage in practices that substantially lessened competition. As a result, the Bureau concluded that there were no grounds to warrant an application to the Competition Tribunal for a remedial order. The Bureau's inquiry focussed largely on third-party provision of scanner data analysis to Canadian manufacturers and retailers that use it to evaluate their marketing activities.

3.1.5 Cinémas Guzzo

On May 13, 2005, the Federal Court, Trial Division sitting in Montreal, dismissed two applications filed by Cinémas Guzzo. The applications, filed in October 2002, concerned the Bureau's inquiry into motion picture distribution and exhibition in Canada, which was discontinued in December 2002. In its decision, the Federal Court denied Cinémas Guzzo access to the report produced by the Bureau's economic expert. The Court held that because the Bureau's decision to discontinue an inquiry is purely discretionary and of an administrative nature, the Court should show deference to that decision. Cinémas Guzzo has appealed this decision to the Federal Court of Appeal.

3.2 Alternative Case Resolution

3.2.1 Interac

On June 16, 2005, the Competition Tribunal approved Interac Association's request to vary the Interac case consent order of June 20, 1996. The variation will allow Interac Association to impose a minimum annual fee and to recover costs associated with significant system changes made by members of the Association.

3.2.2 Manufacturer of a Specialized Residential Construction Product

In the spring of 2005, the Bureau received a complaint from a manufacturer of specialized residential construction products alleging that a group of competing manufacturers was controlling a standard-setting organization's committee. The standard in question provides prescriptive requirements as opposed to performance criteria. The approval of the standard-setting organization is required by provincial governments before the product in question may be sold commercially. As a result, the complainant is alleging that his firm is being prevented from introducing his innovative technology into the Canadian market.

In this case, the Bureau was concerned about possible manipulation of the standard-setting process by certain competitors on the standard committee and the use of standards to block newcomers and innovation.

Following discussions with the Bureau, the standard-setting organization created a task force mandated to develop a test protocol in order to carry out a performance comparison between the pre-existing products and the innovative design. Furthermore, as part of the Bureau's outreach program, a presentation was made to the standard-setting organization in February 2006 in order to generate dialogue and awareness with respect to the importance of competition and the potential anti-competitive pitfalls of standard setting. The Bureau's examination of this matter is continuing.

Chapter 4: Eliminating False or Misleading Representations and Deceptive Marketing Practices in the Marketplace

The Bureau administers and enforces the false or misleading representations and deceptive marketing practices provisions of the Competition Act, as well as three laws promoting fair and truthful representation in the marketing of consumer products, namely, the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act.

The Competition Act contains criminal and civil provisions to address false or misleading representations and deceptive marketing practices in promoting the supply or use of a product or any business interest.

Under the criminal regime, the general provision prohibits all materially false or misleading representations made knowingly or recklessly. Other provisions specifically prohibit deceptive telemarketing, deceptive notices of winning a prize, double ticketing and pyramid selling schemes. The multi-level marketing provisions define the responsibilities of operators and participants in multi-level marketing plans.

Under the civil regime, the general provision prohibits all materially false or misleading representations. Other provisions specifically prohibit performance representations not based on adequate and proper tests; misleading warranties and guarantees; false or misleading ordinary selling price representations; untrue, misleading or unauthorized use of tests and testimonials; bait and switch selling; and the sale of a product above its advertised price. The promotional contest provisions set out the requirements for conducting a contest, lottery, or game of chance or skill.

The Consumer Packaging and Labelling Act, Textile Labelling Act and the Precious Metals Marking Act are regulatory statutes. They prohibit false or misleading representations in specific sectors (non-food prepackaged consumer products, precious metal articles, and textiles and apparel). In addition, this legislation prescribes basic, standardized labelling information, such as bilingual product descriptions, metric measurement declarations and dealer identity, which allows consumers to make informed choices.

Under the criminal regime of the Competition Act as well as under the Consumer Packaging and Labelling Act, the Textile Labelling Act, and the Precious Metals Marking Act, certain practices may be brought before the criminal courts, requiring proof of each element of the offence beyond a reasonable doubt. If the results of an investigation disclose evidence that, in the opinion of the Commissioner, provides the basis for a criminal prosecution, the matter may be referred to the Attorney General of Canada, who determines whether a prosecution should be undertaken. Under the civil regime of the Competition Act, certain practices may be brought for review before the Competition Tribunal, the Federal Court or the superior court of a province. To establish a breach of these provisions, each element of the conduct must be proven on a balance of probabilities.

The first two sections of this chapter describe the Bureau's responses to non-conformity on the part of businesses in relation to the legislation enforced by the Bureau during 2005-2006. The Bureau may also work with firms to eliminate anti-competitive behaviour through alternative case resolution. Examples of this are provided in the third section of this chapter. Finally, under the Competition Act, parties may request written opinions, some of which are summarized in the fourth section of this chapter. For more information on these cases and others, including information notices, news releases and backgrounders, please visit the Bureau's Internet site.

4.1 Mass Marketing Fraud Cases Pursued Under the Criminal Regime of the Competition Act

4.1.1 False or Misleading Representations

The Competition Act contains civil and criminal provisions to address false or misleading representations when promoting the supply or use of a product or any business interest. The general criminal provision prohibits all representations made knowingly or recklessly to the public that are false or misleading in a material respect.

CSCT Inc.

On August 2, 2005, the Bureau laid charges against Michael Reynolds of Toronto, Ontario, and John Armstrong of Penticton, British Columbia, for making false or misleading cancer therapy claims. It was alleged that the accused preyed upon vulnerable consumers, specifically cancer victims and/or their families, by making unsubstantiated representations on their Web site, at seminars, in alternative health-care magazine articles and advertisements, in direct mailings and in telephone communications. These individuals were charged with ten counts each under the Competition Act for knowingly or recklessly making representations to the public that were false or misleading in a material respect and one count each under the Criminal Code of Canada for defrauding the public of money exceeding $5,000.

4.2 Deceptive Telemarketing

The Competition Act prohibits telemarketers from:

making materially false or misleading representations when promoting the supply of a product or a business interest during telephone calls;
asking for payment in advance as a condition of receiving a prize that has been, or supposedly has been, won in a contest or game;
failing to provide adequate and fair disclosure of the number and value of the prizes;
offering a gift as an inducement to buy another product (without fairly disclosing the value of the gift); and
offering a product at a grossly inflated price and requiring the consumer to pay for it in advance.³

The Act also requires that telemarketers disclose the name of the company or person for whom they are working, the type of product or business interest they are promoting, the purpose of the call, the price of any product being sold, and any restrictions or conditions the consumer must meet before the product is delivered.

Alexis Corporation(3636135 Canada Inc.) and 3587932 Canada Inc. and Gerald Goldstein, Scarlet Jove, Armenia Linhares, William Kenwood, Sheldon Cutler, Constantina Athanasopoulos, Jerry Browman, Marcus Miller, Michel Rosenberg, Lawrence Walsh and Doron Kunin

On June 20, 2005, the last of 11 individuals involved in a deceptive telemarketing operation targeting consumers in Australia was sentenced for his role in a prize-pitch scam over a five-week period. The other 10 individuals were each sentenced at different times from 2002 to 2005. Sentences ranged from a conditional sentence of up to two years less a day, up to two years' probation, up to 150 hours of community service and/or fines up to $20,000 depending on the individual. All 11 individuals pleaded guilty under section 52.1 of the Competition Act following a criminal investigation into the Montreal-based companies of Alexis Corporation (3636135 Canada Inc.) and 3587932 Canada Inc. by the Bureau. Wiretaps were used to gather evidence, and over $18,000 was returned to victims.

Between May 2000 and June 2001, the Bureau and PhoneBusters (the Canadian Anti-Fraud Call Centre)⁴ received numerous complaints alleging that telemarketers were explicitly telling consumers they had won valuable prizes, such as a Toyota Corolla or up to US$20,000, his and her diamond watches, a washer and dryer set or up to US$2,500, a tri-coloured gold genuine sapphire bracelet, or a video camera or up to US$2,000. However, customers were required to make a purchase of a promotional item in order to receive these prizes. The telemarketers allegedly deceived and misled consumers about the quantity and value of these prizes.

Pacific Liberty

On September 22, 2005, the Bureau laid charges under section 52.1(3) of the Competition Act against Aleksandr Oks and Oleg Oks, directors of a number of Toronto-area corporations, for their role in various telemarketing scams. It was alleged that the accused preyed on vulnerable Americans with poor credit history by offering them Visa® or MasterCard® credit cards for an upfront fee of US$279 to US$319 even though the accused had no affiliation with these credit companies. The victims' bank accounts were debited, but they did not receive a credit card. The accused have been charged with one count each under the Act for deceptive telemarketing practices and one count each under the Criminal Code for defrauding the public of money exceeding $5,000.

Commercial Business Supplies, Merchant Transaction Supplies, Merchant Supply Services, and International Business Directories, 153595 Canada Inc., 162013 Canada Inc., 162014 Canada Inc., 174440 Canada Inc., M.M. International Business Directories Ltd., and 3350550 Canada Inc.

On September 30, 2005, Justin Pold of Montreal pleaded guilty under section 52.1 of the Competition Act for his role in a telemarketing scam that targeted not-for-profit organizations, businesses and government agencies in Canada, the United States and the United Kingdom. Telemarketers claimed to be the businesses' regular supplier of office products or to be renewing a subscription to a previously ordered business directory when no such supply arrangement or orders had been made. Businesses then received office supplies or directories that they would not have ordered in the absence of these false or misleading representations.

Randolph Misiurak and Stéphane Ouellet, both of Montreal, had pleaded guilty earlier. Mr. Misiurak was sentenced to house arrest as well as to a seven-year prohibition order. Mr. Ouellet received a $3,400 fine. Charles McCulloch of Toronto received a conditional discharge and a ten-year prohibition order. François Lefort of Montreal received an unconditional discharge and a seven-year probation order and was ordered to make a $4,000 donation to charity. Mr. Pold, who led the directories scam at International Business Directories, was sentenced to eighteen months in prison. He also received two years of probation, a seven-year prohibition order under section 34(2.2) of the Act and an order prohibiting him from participating in any telemarketing activity involving the sale of office supplies or business directories. The companies and their president, Michael Mouyal, are awaiting trial, which is scheduled for November 2006.

Infosearch Publications Inc.

On December 8, 2005, charges were laid against six persons and one company, Infosearch Publications Inc., for their alleged involvement in deceptive telemarketing activities in Quebec. The individuals accused are: Anderson Ramirez, Heather Romano, Yancy Romano, Efstathios (Steve) Kok(k)inasidis, Maria Kok(k)inasidis and Charalambos (Bobby) Kok(k)inasidis. Additional charges were laid on March 1, 2006, against Charalambos (Bobby) Kok(k)inasidis and three companies, two of which carry on business under the names Corporate Media Services and one of which carries on business under the name Commercial Media Services. Mr. Kok(k)inasidis was charged with nine counts under the Competition Act for masterminding the alleged deceptive mail and telemarketing scam. In all, 27 charges were laid pursuant to sections 52(1), 52.1(2)(b) and 52.1(3)(a) of the Act. Bobby and Maria Kok(k)inasidis have also been charged with breach of a June 2002 prohibition order, which prohibits them from engaging in deceptive telemarketing for a period of 10 years.

In these related matters, the alleged victims received invoices from the accused companies demanding payment for listings in one of three Internet-based business directories that had not previously been ordered. It is further alleged that the invoices were often preceded by telephone calls advising the alleged victims that they had previously authorized the listing, which the alleged victims said was untrue. The Bureau also alleges that at the height of its operation between April 2002 and September 2003, one of these companies, Infosearch, scammed 10,000 Canadian businesses out of more than $4 million. This investigation was conducted with the assistance of the Montreal Police Service.

Merchant Supply International (9094-6858 Quebec Inc.)/International Merchant Supplies (3838102 Canada Inc.)

On March 30, 2006, the Bureau announced that criminal charges under section 52.1(3) of the Competition Act had been laid against four persons allegedly involved in deceptive telemarketing activities in Quebec. The four persons are Neil Leventhal, Pierre Richard, Rick Aguino and Mathew Grenia. Two companies, Merchant Supply International and International Merchant Supply, were also charged. Telemarketers from these companies contacted businesses in Canada and the United States claiming to be their regular suppliers of rolls of paper, ink cartridges and cleaning cards for use with electronic payment and credit card devices, and/or claiming that an increase in the price of these supplies was imminent. The telemarketers failed to disclose important information such as the price of the merchandise offered and the terms and conditions for returning it. The businesses subsequently received office supplies, which they would not have ordered in the absence of the allegedly false representations.

1462986 Ontario Inc. operating as Business Supply Centre and National Supply Centre

On March 30, 2006, criminal charges were laid against Andrew James Wilson and 1462986 Ontario Inc., also operating as Business Supply Centre and National Supply Centre in the city of Toronto, in the Toronto Region and elsewhere in Canada.

It is alleged that the accused engaged in deceptive telemarketing while promoting the sale of toner and/or ink jet cartridges for use in office equipment such as photocopiers and printers. The parties allegedly failed to disclose mandatory information in a fair and reasonable manner and made false or misleading representations with respect to price increases, price discounts and pricing errors on invoices. It is further alleged that the parties provided clients with inferior (refilled) toner and generic ink jet cartridges at grossly inflated prices. Lastly, it is alleged that these parties used these deceptive practices to defraud Canadian businesses of an amount in excess of $5,000.

4.2 Deceptive Marketing Practices Cases Pursued Under the Civil Regime of the Competition Act

The Competition Act contains civil and criminal provisions to address false or misleading representations and deceptive marketing practices when promoting the supply or use of a product or any business interest. The general civil provision prohibits all representations made to the public that are false or misleading in a material respect. Other provisions specifically prohibit the following:

making performance representations that are not based on adequate and proper tests;
advertising misleading warranties and guarantees;
making false or misleading ordinary price representations;
making untrue, misleading or unauthorized use of tests and testimonials;
offering products at bargain prices that are not available in reasonable quantities;
selling products above the advertised price; and
conducting any contest, lottery or game of chance, skill, or mixed chance and skill without disclosing the required information.

4.2.1 Sears Canada Inc.

In January 2005, following a lengthy hearing, the Competition Tribunal ruled that Sears had breached the Competition Act by making false or misleading representations when advertising discounts on certain tires. This landmark decision was the first to be handed down by the Tribunal under section 74.01(3), the ordinary selling price provisions of the Act. In its ruling, the Tribunal found that Sears had not sold a substantial volume of the tires at the regular prices featured in the advertisements and could not truly have believed that its regular tire prices were genuine and bona fide prices. The Tribunal also upheld the constitutionality of the relevant provisions of the Act.

In April 2005, the Tribunal ordered Sears Canada Inc. to pay a $100,000 administrative monetary penalty, as well as $387,000 toward the Bureau's legal costs. The Tribunal's order also prohibited Sears' automotive business division from engaging in similar conduct for a period of 10 years. The administrative monetary penalty, which Sears agreed to in a joint submission to the Tribunal, was the maximum that could be imposed in these circumstances.

4.2.2 Centre de Santé Minceur

On June 28, 2005, the Bureau filed an application for an order under sections 74.01(a) and (b) of the Competition Act with the Competition Tribunal to prevent five Quebec companies that operate a chain of weight loss clinics called Centre de Santé Minceur and their president, Sylvain Leblanc, from making misleading representations to the public about a weight loss method involving a special apparatus and natural products.

The Quebec companies (Gestion Lebski Inc., La Société de Financement Vanoit Inc., Maigrissimo inc., Gestion Finance Tamalia inc. and 9083-8434 Québec inc.), made the following claims about their products:

"Cellotherm induces weight loss in specific areas, produces the effects of liposuction without surgery, and helps dissolve fat";
"Cure de départ enables people to lose up to nine pounds in seven days";
"Nocto Slim burns off fat during the night"; and
"Nopasim reduces excess fat in specific areas".

In the application, the Bureau requested that the Tribunal order the companies and Mr. Leblanc to cease making certain representations about the weight loss method; to publish a corrective notice in newspapers, in magazines, on Quebec infomercials and on their Web site; and to pay an administrative monetary penalty.

4.2.3 Fuel Saver Pro

In December 2005 and January 2006, four consent agreements (relating to Mike Stothers, Cory Gratton, Tracy Gratton, Everette Gratton and Joe Walsh) were registered with the Competition Tribunal under sections 74.01(1)(a) and (b) of the Competition Act in relation to the marketing of Fuel Saver Pro, a supposed fuel-saving device. The agreements followed a Bureau investigation revealing that between January 2002 and May 2004, several individuals sent spam containing false or misleading representations about the device's ability to increase fuel efficiency and reduce emissions. The Bureau was acting on information obtained from the United States Federal Trade Commission's (FTC) "Button Pusher Spam Sweep." After extensive testing, the FTC and the United States Environmental Protection Agency both concluded that the claims about the Fuel Saver Pro could not be substantiated.

The consent agreements, which are valid for 10 years, require the parties:

not to make any false or misleading representations to the public;
not to make any performance claims to the public without having first provided proof of adequate and proper testing to the Bureau; and
to pay administrative monetary penalties totalling $12,000.

4.2.4 Strategic Ecomm Inc.

On February 22, 2006, the Bureau registered a consent agreement with the Competition Tribunal regarding an Internet-based job scam. Strategic Ecomm Inc. and its sole principal, Matthew Hovila, operated an on-line résumé distribution scheme offering guaranteed results to people seeking employment either in the oil and gas industry or with U.S. government agencies. For a fee, the company claimed that it would distribute customers' résumés to key employers in each industry. The Bureau's investigation revealed that the company made misrepresentations regarding the number of companies to which résumés were forwarded, its relationships with potential employers and the effectiveness of its services. Further, it misrepresented the validity of a "money-back risk-free guarantee" and its endorsement by an on-line third-party watchdog. The company and principal also provided phony customer testimonials and misled customers into believing their services were "on sale" for a time-limited special price.

Under the terms of the consent agreement, Strategic Ecomm Inc. and its principal have agreed to:

admit to having committed reviewable conduct under sections 74.01(1), 74.01(3) and 74.02 of the Competition Act;
pay an administrative monetary penalty of $100,000 and publish corrective notices; and
discontinue the offending conduct on the two Web sites: www.oilcarer.com and www.governmentaljobs.com.

4.2.5 Econoco Inc.

On February 23, 2006, the Bureau filed an application for an order with the Competition Tribunal under sections 74.01(1)(a) and (b) of the Competition Act prohibiting Econoco Inc. and its directors from making misleading representations to the public about the Econopro, which was marketed as a device that saved fuel and reduced emissions. The Bureau application aims to prohibit Econoco Inc. (President Réal Laroche and former V.P. and Technical Director Claude Tardif) from making representations in the form of a statement, warranty or guarantee of the performance or efficacy of the Econopro or similar device that are not based on adequate or proper tests.

4.2.6 Fabutan Sun Tan Studios

On February 27, 2006, the Bureau registered a consent agreement pursuant to sections 74.01(1)(a) and (b) of the Competition Act with the Competition Tribunal requiring Fabutan Corporation and its president, Douglas Scott McNabb, to refrain from making representations that convey the false or misleading impression that moderate tanning has proven health benefits or that moderate tanning has been shown to be effective in reducing the risk of certain cancers, osteoporosis or other conditions, unless those benefits have been demonstrated through controlled, randomized trials. The Bureau discontinued its original application against The Dosco Group Inc. and Fabutan Studios.

Under the agreement, Fabutan has agreed to do the following:

ensure that any messages to the public concerning exposure to UV-B and possible health benefits associated with Vitamin D are accompanied by statements that tanning may cause premature aging of the skin and skin cancer, that mild exposure to UV-B is sufficient to generate Vitamin D and that tanning is not required;
refrain from making statements conveying the impression that tanning has proven health benefits unless such benefits have been scientifically demonstrated;
establish and maintain a corporate compliance program;
post a corrective notice on its Web site; and
pay an administrative monetary penalty of $62,500.

As well, Douglas Scott McNabb agreed to make a charitable donation of $12,500.

4.3 Alternative Case Resolution

In 2005-2006, the Bureau used alternative case resolution to settle 17 matters under the false or misleading representations and deceptive marketing practices provisions of the Competition Act and the provisions of the three standards-based statutes. The Bureau may examine certain matters under both the criminal and civil provisions of the Act, the provisions of the standards-based statutes, or both. The following are summaries of cases resolved through alternative case resolution.

4.3.1 Imported Sunglasses

In May 2005, Bureau officials, acting on information from the Canada Border Services Agency, inspected a shipment of sunglasses from China intended for Edmonton-based wholesaler Gift Cave Corp. The glasses were labelled "Made in Canada" and "UV400 protection." The Bureau seized the 15,000 pairs of imported sunglasses labelled with the misleading representation that they were "Made in Canada." The misleading "Made in Canada" claims raised concerns under section 7(1) of the Consumer Packaging and Labelling Act (CPLA). Further, when Gift Cave failed to provide documentation substantiating the "UV400 protection," concerns were also raised under section 74.01(1) of the Competition Act. Gift Cave agreed to comply with both laws by removing all the offending labels in question. The products were re-inspected by Bureau officers and released from seizure. This matter was resolved in July 2005.

4.3.2 Real Estate Agency

In June 2005, the Bureau resolved a complaint relating to section 74.01 of the Competition Act about deceptive marketing practices on the part of a real estate agency. The complaint alleged that a real estate agency advertisement including information on exclusive listings gave the impression that an agent was excluded from dealing on behalf of clients.

A Bureau examination conducted under the deceptive marketing practices provisions of the Act revealed that the advertisement in question could have raised concerns under the Act, as such statements may not be true in all situations. As a result of Bureau contact, the company agreed in writing to refrain from similar advertising in the future.

4.3.3 Karaoke Compact Discs

In July 2005, the Bureau resolved complaints about the absence of mandatory labelling information on karaoke compact discs supplied by four different American manufacturers or distributors and being sold at five major electronic retailers in Canada. The Consumer Packaging and Labelling Act, section 10(b)(i), requires that each label show "the identity and principal place of business of the person by or for whom the prepackaged product was manufactured or produced for resale." As a result of direct communication with Bureau officials, the American suppliers agreed to correct the labelling of current and future manufactured karaoke compact discs by adding complete dealer identification to the labels.

4.3.4 Imported Cat Foods

In October 2005, the Bureau resolved a complaint regarding the labelling of imported cat food products being distributed and sold at retail pet food stores in Ontario. Section 6(2) of the Consumer Packaging and Labelling Regulations requires that the mandatory common name and net quantity declaration be shown in both official languages on the label of a prepackaged product. The complaint alleged that the products did not include the common name in Canada's two official languages.

As a result of Bureau investigations, the American supplier agreed to correct the labelling of all manufactured products by adding the French common name to all pet food labels. The Bureau follow-up in March 2006 confirmed that all lines of cat food products were in full compliance with the requirements of the Consumer Packaging and Labelling Regulations.

4.3.5 Weight Loss Coaching

In October 2005, the Bureau resolved an issue regarding a weight loss program that was sending out bulk faxes bearing a logo that closely resembled the Government of Canada's logo (a Maple Leaf between two bars), and a bilingual name closely resembling that of Health Canada. A Bureau examination was conducted under section 74.01, the false or misleading representations provisions of the Competition Act. The examination showed that the logo and written representation could mislead consumers into thinking that the Government of Canada, and more specifically Health Canada, either endorsed or was affiliated with the weight loss coaching program being advertised by the company.

The Bureau contacted an official of the company to discuss the issues raised by the faxes. As a result, the company agreed to ensure that future faxes would not have any representations on them that implied Government of Canada approval or endorsement.

4.3.6 Window Retail Company

In November 2005, the Bureau resolved a complaint alleging that a window retail company made representations concerning product warranties that were misleading to the public. A Bureau investigation found the retailer was claiming it offered the industry's best warranty for certain products, as well as the only transferable lifetime warranty. The Bureau determined that other retailers offered similar warranties.

The Bureau contacted company representatives regarding the concerns that this type of advertising raised under the false or misleading representations provisions of section 74.01 of the Competition Act. The company agreed to refrain from stating that it offered the industry's best and only lifetime warranty in future advertising.

4.3.7 Down and Feather Bedding Products

In December 2005, the Bureau resolved complaints alleging that various bedding products sold by a national retailer were labelled and advertised in a potentially misleading manner. A Bureau examination conducted under section 5 of the Textile Labelling Act and section 29 of the Textile Labelling and Advertising Regulations revealed that various comforters were being advertised on the retailer's Web site and in flyers either as "down" or as "down alternative" even though they were made of synthetic fibre. The examination also revealed that the fibre content information shown on the packaging of a brand of pillows contradicted the information on the disclosure label. The Bureau contacted an official with the retail company, and as a result, the company made numerous requested changes to the Web site. The retailer also contacted the pillow manufacturer, which agreed to provide new packaging for the approximately 1,900 pillows valued at $76,000 that were in stock.

4.3.8 Cat Litter

In February 2006, the Bureau resolved a complaint regarding the labelling of a brand of cat litter offered for sale at retail stores across Canada. The complaint alleged that the label did not show the net quantity declaration in the minimum required type height for the size of the principal display surface of the container, contrary to section 14(2)(c) of the Consumer Packaging and Labelling Regulations. The label also included the claims that the product had "40 percent more litter per kg than the leading national brands" and "same usage as 8.8 kg". The latter claim was printed near the net quantity declaration in twice the print size, giving the false impression that the product was 8.8 kg in net quantity.

In response to Bureau investigations, the manufacturer's innovation centre prepared a report to substantiate the product's performance claims. The manufacturer also corrected the labelling of all cat litters by increasing the net quantity declaration type height to 6.4 mm and removing the phrase "same usage as 8.8 kg" from the labels.

4.3.9 Men's Suits

In March 2006, the Bureau resolved a complaint alleging that men's suits sold by a national import/retail company did not comply with the labelling requirements of the Textile Labelling Act and the Textile Labelling and Advertising Regulations. A Bureau examination revealed that the fibre content disclosure did not meet the requirements of the Act and Regulations. Furthermore, the articles were not labelled with adequate dealer identification.

The Bureau contacted officials with the company, who agreed to resolve the matter by relabelling the suits in accordance with the Act and Regulations. Company officials also agreed to ensure that future shipments were labelled with the required information.

4.3.10 Men's Shorts

In March 2006, the Bureau resolved a referral from the Canada Border Services Agency regarding a 78-carton shipment of imported men's shorts that lacked permanent labels containing information on fibre content and dealer identity. Section 11(1) of the Textile Labelling and Advertising Regulations requires that every disclosure label contain the textile fibre content of the article and the name and postal address of the dealer.

As a result of Bureau investigations, the importer added a permanent label with the mandatory information to the textile articles, including the CA number - an identification number assigned to dealers that do business in Canada.

4.3.11 Misleading Fill Disclosure on Feather and Down Pillows

The Bureau received a complaint in January 2006 alleging that fibre content representations for feather and down pillows sold nationally were potentially misleading under the Textile Labelling Act. The disclosure label attached to the pillows stated "Feather and Down." However, testing indicated that the article did not meet the composition standards for either feather or down as required under the Textile Labelling and Advertising Regulations. In fact, the product was deemed illegal for retail sale in Canada because the fill contained an amount of residue that exceeded the maximum allowed under the Regulations.

As a result of the Bureau's examination, the retailer and the supplier jointly agreed to resolve the matter by:

removing the product, valued at approximately $30,000, from sale across the country; and
returning the product to the supplier to be destroyed.

This matter was resolved in March 2006.

4.4 Written Opinions

The Bureau provides legally binding written opinions to businesses seeking to comply with the Competition Act. Company officials, lawyers and others may request a written opinion on whether a proposed business plan raises an issue under the Competition Act. Written opinions remain binding for as long as the material facts remain substantially unchanged and the conduct or practice is carried out as proposed.

To promote compliance with and foster transparency in the administration and enforcement of the Act, the Bureau publishes detailed summaries of its written opinions on the Internet site.

The Bureau issued 18 written opinions concerning the criminal and civil false or misleading representations and deceptive marketing practices provisions of the Act. Sixteen of these opinions dealt with the criminal provisions of the Act, specifically sections 52, 55 and 55.1. Three opinions dealt with the civil provisions, specifically, sections 74.01(1)(a) and 74.06. One opinion (4.4.8) dealt with sections 52 and 74.01(1)(a).

Section 52 of the Act prohibits all representations that are made knowingly or recklessly in any form and are false or misleading in a material respect.
Under sections 55 and 55.1 of the Act, an operator or participant in a multi-level marketing plan cannot make representations about compensation without disclosing the compensation a typical participant would receive. Further, a multi-level marketing plan that features recruitment bonuses, a required volume of purchases by participants as a condition of entry, inventory loading or one that lacks a buy-back guarantee on reasonable commercial terms constitutes a prohibited pyramid selling scheme.
Section 74.01(1)(a) of the Act prohibits all representations, in any form whatsoever, that are false or misleading in a material respect.
Section 74.06 of the Act prohibits any promotional contest that does not disclose the number and approximate value of prizes, the geographic area or areas in which the prizes may be awarded and any important information relating to the chances of winning, such as the odds. The Act also stipulates that the distribution of prizes must not be unduly delayed, and that participants must be selected, or prizes distributed, randomly or on the basis of skill.

The following are examples of written opinions that dealt with the criminal and civil provisions of the Act.

4.4.1 Travel Certificate Products

In January 2005, a company that distributes and sells travel certificate products returned to the Bureau for a second opinion on whether a proposed multi-level marketing plan would raise concerns under the Competition Act. The company had made changes to its original marketing plan following the Bureau's first negative opinion in November 2004.

The Bureau examined the proposal under sections 55 and 55.1, the multi-level marketing and pyramid selling scheme provisions of the Act. In April 2005, it provided a positive opinion on the grounds that the revised plan appeared to comply with the requirements of the Act. The Bureau's positive opinion was based on its findings that:

the company could provide a typical earnings statement since it had previously operated a plan selling the same products;
the company determined that participants earning between US$1,600 and US$3,200 accounted for the largest number of participants in the plan;
the company assumed responsibility for updating the typical earnings statement when data for the current plan became available within a maximum time frame of one year;
in this specific case, the $300 personal business volume sales requirement to become a qualified independent distributor and the $75/$50 minimum sales threshold to maintain this status did not create a sufficiently strong inducement to purchase the product and therefore did not create a de facto purchase requirement;
professional advancement was based on the building of sales volume in individual lines, meaning that increased levels of participation were based on sales volumes and not the recruitment of participants into the plan.

4.4.2 Poker Tournament

In March 2005, a company sought a written opinion on whether a proposed promotional contest could raise concerns under the Competition Act. The company proposed to run a poker tournament that would provide the content for a television series. The contest offered two methods of entry: a skill-based selection method for the preliminary rounds and a random draw for participants to join the winners in the final rounds. The contest did not require the participants to purchase any products, but they were required to go to the tournament venue in Toronto, Ontario. The complete rules and regulations for the contest were to be posted at the tournament site and on the company's Web site.

On May 5, 2005, the Bureau provided its opinion that the contest as proposed would not give it grounds to launch an inquiry under section 74.06 of the Act. In the Bureau's view, the contest would adequately disclose the number and approximate value of prizes, the area or areas to which they would relate, and any important information relating to the chances of winning, such as the odds of winning.

4.4.3 Privilege Card Distributor

In May 2005, a business that planned to distribute and sell privilege cards entitling the bearer to discounts at participating merchants and to participation in the compensation plan based on recruitment of new members sought a written opinion on whether the proposed multi-level marketing plan would raise concerns under the Competition Act.

In June 2005, the Bureau issued a negative opinion for the following reasons:

the operator had not made fair, reasonable and timely disclosure of information relating to compensation received by typical participants in the plan, as required by section 55(2) of the Act;
the proposed arrangement seemed to constitute a pyramid selling scheme, as prohibited by section 55.1 of the Act. There was no way to distinguish between membership in the plan and purchase of the product, meaning the plan contravened sections 55.1(1)(a) and 55.1(1)(b) of the Act. Compensation, in the form of either cash or a premium, was paid to participants for the sale of the product, suggesting that the initial purchase was not made at the cost price or for the purpose of facilitating sales. This practice contravened section 55.1(1)(b) of the Act. Furthermore, since there was a direct link between purchases and recruitment of participants in the plan, the participants were receiving compensation for recruiting new participants, which contravened section 55.1(1)(a) of the Act; and
the plan made no provision for sales to non-participants. Participants sold cards to new participants, thus recruiting the purchasers as new members. The structure of the compensation plan strongly encouraged prospective participants to undertake recruitment in order to develop their own networks.

4.4.4 Consumer Items

In July 2005, a company that markets consumer items sought a written opinion on whether its proposed multi-level marketing plan would raise concerns under the Competition Act. In July 2005, the Bureau provided a negative opinion on the grounds that the plan appeared to constitute a pyramid selling scheme for the following reasons:

participants were compensated for everyone they sponsored who purchased a product package. This would be deemed to be compensation based on the recruitment of participants, thereby meeting the definition of a pyramid selling scheme in section 55.1(1)(a) of the Act;
the plan did not appear to contain a buy-back policy, raising issues with section 55.1(1)(d) of the Act;
there did not appear to be a disclosure of earnings of a typical participant, thus raising issues under section 55(2) of the Act; and
participants in this plan were required to purchase a product package. Under section 55.1(1)(b) of the Act, any required purchase must be for the purpose of facilitating sales and be sold at the seller's cost. However, three of the products in this package were not required in order to facilitate sales, raising issues under the Act.

4.4.5 Telecommunications Services

In April 2005, a company marketing third-party telecommunications services sought a written opinion on whether its proposed multi-level marketing plan would raise concerns under the Competition Act. Subsequent to the Bureau's negative opinion issued in May 2005, the company revised its marketing plan and sought a second written opinion. In August 2005, the Bureau provided a positive opinion on the grounds that the revised plan appeared to comply with the requirements of sections 55 and 55.1 of the Act. The following revisions were reflected in the proposed marketing plan:

the company agreed to include a disclosure of the earnings of typical participants in the plan at relevant points in the plan in order to avoid potential problems under section 55(2) of the Act;
participants were required, as a condition of becoming active members, to make a minimum of three sales (including one to a customer other than themselves and one to a customer not in the same domicile);
movement in the plan was to be based on the personal sales volumes of participants and those of other participants recruited into the plan;
participants in the plan would earn bonuses based on their sales volume; and
the company agreed to eliminate direct monetary payments to participants who recruited and trained new participants. Trainers would be remunerated based on a commission tied to the sales made by the trainee within 90 days of the conclusion of any training session.

4.4.6 Memberships and Training Products

In July 2005, a company distributing memberships and training products sought a written opinion on whether a proposed multi-level marketing plan would raise concerns under the Competition Act. In August 2005, the Bureau provided a negative opinion for the following reasons:

the operator failed to make reasonable and timely disclosure of the earnings of typical participants, as required by section 55(2) of the Act;
the plan provided participants who paid to join the plan with the right to receive compensation for recruiting other participants into the plan who had also paid to join. Prospective participants were entitled to participate at the introductory level for free or to pay a fee to participate at a higher level, but significant incentives existed for joining the plan at the higher levels. The Bureau considered this to be compensation related to recruitment and the plan was deemed to constitute a pyramid selling scheme as defined by section 55.1(1)(a) of the Act;
the plan also rewarded participants who recruited other participants through training bonuses. The Bureau considered these to be compensation related to recruitment, and the plan was deemed to constitute a pyramid selling scheme as defined by section 55.1(1)(a) of the Act;
the plan required prospective participants to pay for a specified number of products in order to participate in the plan at higher levels. The Bureau deemed this to constitute a prohibited pyramid selling scheme as defined by section 55.1(1)(b) of the Act since compensation should be based on product sales, not on required purchases; and
the business plan did not contain any information relevant to the compensation that a typical participant could actually or would likely receive, as required by section 55(2) of the Act.

4.4.7 Stock Market Tournament

In July 2005, a company sought a written opinion on whether a promotional contest could raise concerns under the Competition Act. The company made a proposal to run a stock market tournament with a large cash prize for the winner. The rules would allow anyone to enter the tournament upon the payment of a fee, and the contest would be conducted over the Internet. The complete rules and regulations for the contest would be posted on the company's Web site and would also be included in the company magazine. All advertisements would contain a short form of disclosure.

On September 7, 2005, the Bureau provided its opinion that the contest as proposed would not give it grounds to launch an inquiry under section 74.06 of the Act. In the Bureau's view, the contest would adequately disclose the number and approximate value of prizes, the area or areas to which they would relate, and any important information relating to the chances of winning, such as the odds of winning.

4.4.8 Cash Back Incentive Program

In July 2005, a company that markets promotional programs to retailers requested a written opinion on an incentive program. Under the proposed program, retailers would offer prospective customers, as an incentive to complete a purchase, a "cash back" certificate redeemable three years from the date of purchase.

In its opinion issued in October 2005, the Bureau stated that the proposed promotional programs could raise concerns under both the criminal and civil false or misleading representations provisions of the Competition Act, sections 52.(1) and 74.01(1)(a). In particular, the Bureau raised concerns that representations made in the marketing materials could cause retailers who bought into the program to make false or misleading representations to the public regarding the "cash back" vouchers, including:

the length of time before consumers could make a claim;
the rules to qualify for "cash back";
the number and variability of factors affecting the size of "cash back" refunds;
the extent to which liabilities would be covered by insurance;
comparisons suggesting that the program would operate "like insurance"; and
suggestions that the program was based on proven actuarial data and statistics.

Chapter 5: Reviewing Mergers

The Bureau reviews merger transactions under section 92 of the Competition Act and assesses whether a proposed merger is likely to substantially lessen or prevent competition. If the Bureau finds that a transaction is likely to affect competition, the Commissioner may ask the merging parties to restructure the merger or suggests remedies to resolve particular competition issues. When concerns cannot be resolved by negotiation, the Commissioner may decide to bring an application to the Competition Tribunal.

The number of mergers the Bureau reviewed in 2005-2006 increased from the previous year, continuing an upward trend from 2004-2005. The size and scope of the mergers were also notable, as was the complexity of the competition issues they raised. In fact, there was a significant increase in the number of complex mergers in 2005-2006 compared with the preceding year.

5.1 International Co-operation

International co-operation is critical when reviewing mergers that involve more than one jurisdiction. To the extent possible, the Bureau shares its views and information about mergers with other reviewing jurisdictions, co-ordinates the timing of the review process and seeks consistent remedies.

In 2005-2006, the Bureau continued to co-operate with international organizations such as the Organization for Economic Co-operation and Development (OECD) and the International Competition Network (ICN). The Bureau works with the OECD Competition Committee to promote international co-operation in competition enforcement for merger review procedures. In addition, it contributes significantly to the ICN's Mergers Working Group (see Chapter 6).

This chapter summarizes some of the key merger cases that were new or ongoing during 2005-2006 and provides comprehensive tables of merger examinations concluded during the year, along with statistics on service standards.

5.2 Key Merger Cases

5.2.1 United Grain Growers Limited and Agricore Cooperative Ltd.

In July 2001, two of the largest grain-handling companies in western Canada, United Grain Growers Limited (UGG) and Agricore Cooperative Ltd., announced they would merge to form Agricore United (AU). The Bureau advised the parties that the proposed transaction was likely to substantially lessen competition in certain grain-handling markets in Manitoba and Alberta and in grain-handling services at the Port of Vancouver. In response, AU agreed to divest up to seven primary grain elevators in western Canada to address competition concerns in that market. In February 2002, the Competition Tribunal issued a consent order requiring AU to divest certain primary grain elevator assets in Manitoba and Alberta.

Following a hearing in September 2002, the Tribunal found that UGG's acquisition of Agricore Cooperative's port terminal assets at the Port of Vancouver substantially lessened competition in the market for grain-handling services at the Port of Vancouver. On October 17, 2002, the Bureau announced that it had reached an agreement with AU to divest either the UGG or Pacific grain-handling terminal at the Port. A consent agreement reflecting the settlement was registered with the Tribunal, and AU subsequently selected the UGG Terminal for divestiture. The consent agreement stipulated that if the port terminal was not divested by AU within an initial sale period, the divestiture was to be carried out by a trustee. Subsequently, the Commissioner granted ten extensions of the initial sale period but on August 10, 2005, refused further extensions.

In August 2005, AU filed an application with the Tribunal pursuant to section 106 of the Competition Act for an order rescinding the consent agreement. The end of the initial sale period was stayed pending resolution of the section 106 application. AU claimed, among other matters, that the circumstances leading to the agreement had changed so significantly that, had those circumstances existed in October 2002, AU would not have entered into the consent agreement. AU claimed, for example, that the amount of "uncommitted grain" shipped to the Port of Vancouver by non-integrated grain companies in Western Canada and available to a prospective purchaser of the UGG Terminal had diminished dramatically, such that a purchaser would not be able to secure sufficient volume to operate the terminal on a sustainable basis. The Bureau took the position that the circumstances leading to the consent agreement had not changed; among other matters, the volume of "uncommitted grain" was unchanged.

Hearings before the Competition Tribunal began in March 2006. Shortly after the fiscal year-end, AU discontinued its application. The next day a trustee was appointed with the mandate and sole authority to divest the UGG Terminal by September 12, 2006. The discontinuance and related documents can be found on the Competition Tribunal's Web site.

5.2.2 Saskatchewan Wheat Pool and James Richardson International Ltd.

On April 6, 2005, Saskatchewan Wheat Pool and James Richardson International Ltd. announced the creation of a joint venture whereby their two port grain terminals in Vancouver would be operated as one combined facility that would market its grain-handling services. Following a thorough review of the proposal, the Bureau concluded that the joint venture would likely result in a substantial lessening of competition in the provision of grain-handling services at Canadian west coast ports. On November 10, 2005, the Bureau filed an application with the Competition Tribunal challenging the joint venture. In December 2005, the Tribunal issued an Interim Hold Separate Order prohibiting the parties in question from jointly engaging in specified marketing activities and from sharing specific marketing information until the Tribunal had made its final determination on the merits of the Bureau's application.

In February 2006, the parties filed their responses to the Bureau's application, and the Bureau's reply followed in March 2006. The Canadian National Railway Company, the Canadian Pacific Railway Company Limited, the Canadian Wheat Board and the Vancouver Port Authority were granted leave to intervene.

As of March 31, 2006, the time lines for the remainder of the proceedings before the Tribunal had not been scheduled.

5.2.3 West Fraser Timber Co. Ltd. and Weldwood of Canada Ltd.

On December 7, 2004, the Bureau filed a consent agreement with the Competition Tribunal addressing competition concerns raised by the merger of West Fraser Timber Co. Ltd. and Weldwood of Canada Ltd. The consent agreement required the parties to divest two sawmills and related assets including timber tenures and harvesting rights. In February 2005, the Burns Lake Native Development Corporation (BLNDC) et al. filed an application with the Tribunal for an order rescinding or varying the consent agreement to recognize their rights and interests. To resolve the threshold issue of whether BLNDC et al. had standing to challenge the consent agreement, the Bureau filed a reference under section 124.2(2) of the Competition Act for a determination of the meaning of the term "directly affected" in the context of section 106 of the Competition Act. Thereafter, BLNDC et al. launched two appeals regarding preliminary rulings by the Competition Tribunal on the procedural propriety of the reference. In a judgment released March 7, 2006, the Federal Court of Appeal dismissed both appeals. The Tribunal subsequently released its decision on the Bureau's reference dismissing the application by the BLNDC et al. on the threshold issue, finding that they were not "directly affected" parties for the purposes of section 106 of the Competition Act. This decision is currently under appeal by BLNDC et al.

The B.C. Minister of Forests completed the divestiture of the South Line Tenure pursuant to the consent agreement in November 2005, and the Bureau approved the purchase. West Fraser has advised the Bureau about the sale process to be used to divest the assets with respect to which Burns Lake Native Development Corporation et al. objected. At year-end this matter was still ongoing. A copy of the public version of the registered consent agreement can be found on the Competition Tribunal's Web site.

5.2.4 RONA Inc. and Réno-Dépot Inc.

On September 4, 2003, in anticipation of a merger between RONA Inc. and Réno-Dépôt Inc., the Bureau registered a consent agreement with the Competition Tribunal, in which RONA agreed to divest itself of the Réno-Dépôt store in Sherbrooke, Quebec. On September 10, 2003, RONA acquired 20 Réno-Dépôt stores in Quebec and Ontario. By late February 2004, RONA still had not sold the Sherbrooke store, and a trustee was appointed to carry out the sale.

On August 30, 2004, the consent agreement was extended to enable the trustee to complete negotiations for the sale of the Sherbrooke store. On November 24, 2004, an Agreement of Purchase and Sale was signed by the trustee and the purchaser.

On January 10, 2005, RONA filed a notice of objection to the proposed sale along with an application under section 106(1) of the Competition Act. RONA argued that the sale of the Réno-Dépôt store in Sherbrooke was no longer necessary because a Home Depot was to open in Sherbrooke at the end of 2005, thereby resolving any competition concerns.

On April 29, 2005, following RONA's consent, the Tribunal issued an order approving the sale between the trustee and the purchaser, which would be binding only if the Tribunal dismissed RONA's application. On May 30, 2005, the Competition Tribunal allowed RONA's application under section 106 and rescinded the consent agreement.

The public version of the Tribunal's Reasons for Order is available on the Competition Tribunal's Web site.

5.2.5 Cineplex Galaxy Limited Partnership and Famous Players

In late 2004, Cineplex Galaxy Limited Partnership contacted the Bureau about its interest in acquiring the Famous Players Division of Viacom Canada Inc. The Bureau conducted an extensive merger review to determine the competitive effects of the proposed transaction by gathering information from a number of sources, including the parties to the transaction, major Hollywood and Canadian film distributors, other exhibitors and foreign antitrust authorities with recent experience in this industry. Economic and industry experts were also retained.

The Bureau examined the full competitive impact of the merger in each of the cities where Famous Players and Cineplex Galaxy competed. It determined that the transaction would likely substantially lessen competition in a significant number of geographic areas of overlap in terms of both price and non-price factors (such as theatre quality, film choice and innovation). To resolve these concerns, the Bureau required the divestiture of over 30 theatres in 17 Canadian cities.

In considering the cities in which divestitures would be required, the Bureau examined a number of factors, including pre- and post-merger market shares, theatre locations, the quality and style of theatres and the remaining competition (including recent and pending entry).

The Bureau was satisfied that, with the implementation of the divestitures required by the consent agreement, the proposed transaction would be unlikely to result in a substantial lessening or prevention of competition. Cineplex Galaxy was successful in divesting the Western Canada and Ontario packages of theatres to Empire Theatres Limited, a transaction that was completed in September 2005. The theatres located in Quebec were successfully divested to Fortune Cinemas Inc. in March 2006.

The registered consent agreement can be found on the Competition Tribunal's Web site. For more information on this case, please consult the Technical Backgrounder, which is available on the Bureau's Internet site.

5.2.6 Quebecor Media Inc. and Sogides Ltéé

In the fall of 2005, Quebecor Media Inc. contacted the Bureau about its interest in acquiring Sogides Ltée. The Bureau reviewed the proposed merger to determine its effect on competition by gathering information from a number of sources, including parties to the transaction, French-language book publishers, distributors and retailers, various Quebec book industry associations and government officials responsible for the industry.

Following this review, the Bureau concluded that the merger would not likely result in a substantial lessening or prevention of competition in the publishing and distribution of French-language trade books. However, in the course of reviewing the transaction, the Bureau learned that Sogides' president had an interest in Gestion Renaud-Bray Inc., which competed with Quebecor's Archambault Group Inc. bookstores. To eliminate the possibility of information exchanges between Archambault and Renaud-Bray via Sogides' president, Quebecor and Sogides signed a consent agreement with the Bureau addressing this issue. The Bureau concluded that such an information exchange could have been detrimental to publishers and distributors that had supplier relationships with Archambault and Renaud-Bray bookstores.

5.2.7 PaperlinX Canada Ltd. and Cascades Fine Paper Group Inc.

On November 17, 2005, PaperlinX Limited of Melbourne, Australia announced that it intended to acquire the paper merchant and distribution business of Cascades Fine Paper Group Inc. through its Canadian subsidiary, PaperlinX Canada Ltd.

In March 2006, the Bureau filed a consent agreement with the Competition Tribunal addressing competition concerns raised by the acquisition. Under the terms of the agreement, PaperlinX was required to divest all Cascades' assets relating to the fine paper merchants business in British Columbia and Alberta (excluding Cascades' graphics arts business). PaperlinX agreed not to obstruct or object to the supply of fine paper by any fine paper mill to the purchaser of the divested assets. Furthermore, Cascades Fine Paper Group Inc. agreed to supply its fine paper brands to the divested business before and after the divestiture. The agreement also provided for the appointment of a trustee to complete the sales process if PaperlinX was unable to divest Cascades' merchant assets in the two provinces.

The registered consent agreement can be found on the Competition Tribunal's Web site. For more information on this case, please consult the Technical Backgrounder , which is available on the Bureau's Internet site.

5.2.8 Astral Media Inc. and Telemedia Radio Inc.

On December 21, 2001, the Bureau challenged the proposed acquisition by Astral Media Inc. of Telemedia Radio's French-language radio stations and of a 50 percent interest in Radiomédia (Astral already owned the other 50 percent interest) on the grounds that it would substantially lessen competition in six radio advertising markets in Quebec.

On September 3, 2002, a consent agreement was filed with the Competition Tribunal to resolve Bureau concerns about the merger. The agreement included the requirement that Astral sell its AM radio stations in all six relevant markets and CFOM-FM in Quebec City. Astral's two initial attempts to sell these radio stations failed when the necessary regulatory approval was not granted in the first case and the potential buyers withdrew their application in the second.

Subsequently, Corus Entertainment Inc. proposed exchanging five of its Quebec regional radio stations for the Astral radio stations that were available for sale. On January 21, 2005, the CRTC approved this transaction subject to certain conditions. The transaction between Astral and Corus was completed on May 27, 2005, resolving Bureau concerns.

The consent agreement can be found on the Competition Tribunal's Web site.

5.2.9 The Procter and Gamble Company and The Gillette Company

On January 28, 2005, The Procter & Gamble (P&G) Company announced that it intended to acquire The Gillette Company in a merger that would combine two of the world's leading consumer products companies. The Bureau conducted a thorough merger review to determine the competitive effects of the removal of Gillette as a competitor in the oral care, antiperspirant/deodorant and aftershave markets. Over the course of the examination, the Bureau consulted with customers and competitors and co-operated with the Directorate-General for Competition of the European Commission and the United States Federal Trade Commission.

The Bureau identified concerns in the oral care markets for battery-powered toothbrushes and teeth whitening products, which are not manufactured in Canada by either P&G or Gillette. In order to resolve competition concerns, P&G made commitments to the European Commission and the Federal Trade Commission to divest the Spinbrush and Rembrandt oral care lines worldwide. The Bureau was satisfied that these divestitures resolved competition concerns in Canada.

5.2.10 Cargill Limited and Better Beef Group of Companies

On April 15, 2005, Cargill Limited and the Better Beef Group of Companies, two of the largest beef processors in Canada, announced that Cargill proposed to acquire substantially all of the assets of Better Beef's cattle procurement, beef processing and other businesses. Following a comprehensive review, the Bureau announced on August 30, 2005, that the acquisition was not likely to result in a substantial lessening or prevention of competition.

In the course of its inquiry, the Bureau examined the merger's impact on the Canadian cattle and beef industry, focussing on the purchase of cattle and the sale of boxed beef and case-ready beef. The Bureau had to consider the impact of the bovine spongiform encephalopathy (BSE) crisis. The examination revealed that there was limited direct competitive overlap between Cargill and Better Beef in the purchase of cattle. In addition, the United States border had reopened to the export of live Canadian cattle under 30 months of age during the summer of 2005. Canadian cattle producers thereby regained a viable and competitive market.

The Bureau determined that, even if the border were to close again, the effects of the proposed transaction would not result in a substantial lessening or prevention of competition because of the geographic distance between Cargill's beef processing facility in High River, Alberta, and Better Beef's facility in Guelph, Ontario. The Bureau also concluded that Canadian retailers would still have access to sufficient sources of supply for boxed beef following the merger and that large retailers would likely have sufficient countervailing power to offset any exercise of market power by the merged company in the supply of case-ready beef.

For more information on this case, please consult the Technical Backgrounder, which is available on the Bureau's Internet site.

5.2.11 GlaxoSmithKline Inc. and ID Biomedical Corporation

On September 7, 2005, GlaxoSmithKline Inc. (GSK) announced that it had reached an agreement to acquire ID Biomedical Corporation (IDB), a Vancouver-based biotechnology company developing innovative vaccine products. GSK, headquartered in the United Kingdom, is one of the world's leading research-based pharmaceutical companies. IDB principal business in Canada is injectable influenza vaccines. In November 2005, the Bureau concluded that the transaction would not likely result in a substantial prevention or lessening of competition.

The Bureau found that the vaccine industry in Canada is unique because of the role that the Canadian federal, provincial and territorial governments play in providing certain vaccine products and because of the long-term supply contracts necessary to ensure security of supply for Canadians. Prior to the acquisition, IDB provided approximately 75 percent of the public requirements of influenza vaccine.

The Pandemic Contract, which expires in 2011, provides for a state of influenza pandemic vaccine production readiness in Canada by providing vaccines to Canadians in the event of a pandemic. This contract must be fulfilled by a pharmaceutical company that has sufficient production facilities in Canada. IDB (now a wholly-owned subsidiary of GSK) is responsible for the contract, which also covers 50 percent of the public requirement of annual influenza vaccine. The remaining 50 percent of the requirement for annual influenza vaccine is provided further to two other contracts, currently split between IDB and Sanofi Pasteur.

The Bureau found that there was no product overlap in Canada between the parties, since GSK never sold influenza vaccine in Canada prior to its acquisition of IDB. In addition, there were no significant issues relating to products under development.

The merger did not