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Abuse of dominance

Abuse of dominance occurs when a dominant business (or group of businesses) engages in activity that stops or substantially reduces competition in a market. These anti-competitive activities may be:

The Competition Act contains specific provisions regarding these types of abuse of market power.

Note: Being a large or dominant business is not, by itself, a cause for concern under the Competition Act. For example, a business can become large by providing better products and services than its competitors.

Examples of potentially anti-competitive practices

Transcript

These days, you have to contract for virtually everything.

From waste removal to water heaters, and everything in between. Contracts can be tricky.

Clauses in contracts can be tricky too.

Sometimes clauses are right up front… and sometimes they're hidden in the fine print.

When you sign a contract as a business owner, clauses that could be lurking in the fine print could take you by surprise… limit your options… and cost you money.

Some clauses can prevent you from changing suppliers by locking you in long-term contracts.

Others may automatically renew without notice, unless you cancel within a limited window, and... some have high fees for early termination of the contract.

Here's what to watch for:

Price escalation clauses
These allow suppliers to increase the price at any time and for many reasons;
Exclusivity clauses
These require you to buy all of the product or service from the one supplier;
Or, "right of first refusal" clauses

These force you to inform your current supplier about any offers from other suppliers and stay with your current supplier if they match the best offer.

This obligation can even extend beyond the term of your contract.

You may not want these because they can limit your options and raise your costs.

At the Competition Bureau, we pay a lot of attention to these, and other restrictive clauses because we know that under certain circumstances they can hurt consumers and harm competition.

Sometimes, the use of restrictive clauses like these may contravene the Competition Act, and warrant Bureau intervention.

Before you sign on the dotted line, here's the bottom line.

You have options—and the best options include looking carefully and asking questions.

Remember, knowledge is power. So here's our advice:

  • Shop around, get multiple quotes.
  • Read the terms, conditions and fine print carefully.
  • Remember that you can amend contract clauses when negotiating the terms of your contract.
  • Ask for a copy of the contract so you can review the terms and conditions, and monitor any changes.
  • You can also use quotes from other suppliers to negotiate more favourable terms and conditions with your current service supplier even if you're under contract.

Contracts are all about the clauses—get to know them!

Video length: 2 minutes, 33 seconds

Below are a few examples of practices that may contravene the Competition Act:

For an abuse of dominance case to be brought before the Competition Tribunal, all of the following criteria must be met:

Note: A substantial lessening or prevention of competition can be seen through higher prices or a reduction in quality or innovation. Sometimes a competitor may be harmed, but not competition overall. Additionally, the above criteria can apply to a single firm or to a group of companies.

Remedies for non-compliance

When a company is found to be misusing its market power we will usually try to obtain voluntary compliance with the law. If all parties agree on a solution to restore competition to the marketplace, a formal consent agreement is then registered with the Competition Tribunal.

Consent agreements, which have the force of a court order, are inexpensive and quicker alternatives to litigation. They enable us to resolve concerns in a timely and efficient manner while ensuring compliance with the Competition Act.

If voluntary compliance cannot be achieved, we may file an application before the Tribunal for an order to remedy the situation.

When a company is found to have violated the abuse of dominance provisions of the Act, the Tribunal has a number of remedies at its disposal to restore competition. The most common remedy is to issue an order that requires the company to either stop the anti‑competitive conduct or to take specific measures to overcome the effects of the conduct.

The Tribunal may also impose a monetary penalty. This can be for any amount up to the greater of:

The Competition Act also allows private parties (individuals or corporations) to ask the Tribunal for a remedying order if they are directly and substantially affected by another company’s abuse of dominance. The process for filing a private party application is set out in the Competition Tribunal Rules, section 115.

About the Competition Tribunal

The Competition Tribunal is a quasi-judicial body that has the power to hear and dispose of matters involving non compliance with various sections of the Competition Act.

All Tribunal hearings are open to the public; however, due to sensitive or confidential testimony, a hearing may occasionally be held “in camera,” during which members of the public are excluded. An appeal of any Tribunal decision may be filed with the Federal Court of Appeal.

How to ensure compliance with the law

If you are unsure about what complying with the Competition Act means for your business, we recommend that you seek legal advice.

You can protect your business by having an effective compliance program in place. This will help your company comply with the law and it could reduce the risks associated with non-compliance. Like an early-warning system, a compliance program can help you detect and correct unlawful conduct quickly before it damages your company, your reputation, and your bottom line.

We also facilitate compliance by providing written opinions, which are subject to fees. These provide businesses with an opinion regarding proposed activities or conduct. Written opinions are binding if all material facts have been submitted, are accurate, and remain substantially unchanged.

Further reading

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